FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended: September 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to ________________
Commission File Number: 0-11412
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AMTECH SYSTEMS, INC.
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(exact name of Registrant as specified in its charter)
Arizona 86-0411215
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
131 South Clark Drive, Tempe, Arizona 85281
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 602-967-5146
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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(Title of Class)
Redeemable Public Warrant
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(Title of Class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety (90) days.
[X] Yes [ ] No
Indicate by check mark, if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[ ] Yes [X] No
State the aggregate market value of the voting stock held by
nonaffiliates of the Registrant. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock, as of a specified date within sixty (60) days prior to the
date of filing. (See definition of affiliate in Rule 405, 17 CFR 230.405).
$15,804,706 as of December 8, 1995
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE (5) YEARS:
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date.
2,152,851 shares of Common Stock, $.01 par value, as of December 22,
1995. There is only one class of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Listed hereunder the following documents if incorporated by reference
and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
document is incorporated: (i) any annual report to security holders; (ii) any
proxy or information statement; and (iii) any prospectus filed pursuant to Rule
424(b) or (c) under the Securities Act of 1933. The listed documents should be
clearly described for identification purposes (e.g., annual report to security
holders for fiscal year ended September 30, 1995).
PART III (Items 10-13) is incorporated by reference to the Registrant's
proxy statement for the Registrant's Annual Meeting of Shareholders to be held
on or about February 29, 1996.
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TABLE OF CONTENTS
Page
ITEM 1. BUSINESS ........................................................5
GENERAL DEVELOPMENT OF BUSINESS .................................5
SEMICONDUCTOR EQUIPMENT BUSINESS ................................5
General .....................................................5
Existing Products ...........................................6
Proposed New Product ........................................9
Order Backlog ..............................................12
Manufacturing ..............................................12
Engineering-Research and Development .......................12
Patents ....................................................13
Marketing ..................................................14
Competition ................................................15
Employees ..................................................16
TECHNICAL CONTRACT PERSONNEL BUSINESS ..........................16
General ....................................................16
Source and Availability of Contract Personnel ..............17
Marketing and Customers ....................................18
Seasonality ................................................18
Competition ................................................18
Overhead Personnel .........................................19
Future Plans ...............................................19
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES ....................................20
ITEM 2. PROPERTIES......................................................20
ITEM 3. LEGAL PROCEEDINGS ..............................................21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............21
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDERS' MATTERS ..........................................22
Market Information .............................................22
Holders ........................................................22
Dividends ......................................................22
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Page
ITEM 6. SELECTED FINANCIAL DATA ........................................23
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ............................25
Liquidity and Capital Resources ................................25
Results of Operations ..........................................26
Fiscal 1995 compared to Fiscal 1994 ........................26
Semiconductor Equipment Business ......................26
Income From Continuing Operations......................27
Discontinued Technical Contract Personnel Business ....28
Total Company .........................................29
Fiscal 1994 compared to Fiscal 1993 ........................30
Semiconductor Equipment Business ......................30
Income From Continuing Operations......................31
Discontinued Technical Contract Personnel Business ....31
Total Company .........................................32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ....................33
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ...........34
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .............35
ITEM 11. MANAGEMENT REMUNERATION ........................................35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT .....................................................35
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................35
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K .......................................................36
SIGNATURES ...................................................................39
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Amtech Systems, Inc. (hereinafter the "Company" or the "Registrant")
was incorporated in Arizona in October, 1981, under the name Quartz Engineering
& Materials, Inc., and changed to its present name during 1987. At its inception
the Company's business was the manufacture of low technology quartzware
implements for sale to and use by manufacturers of semiconductor chips. The
Company is currently, and has been since 1987, engaged primarily in the
manufacture of several items of capital equipment, one of which is patented,
used by customers in the manufacture of semiconductors. The Company has recently
obtained a U.S. patent on technology on which it expects to base a proposed new
photo chemical vapor deposition ("CVD") product for use in semiconductor
manufacturing facilities. The Company has engaged the University of California,
Santa Cruz, to conduct a study to determine the feasibility of such a product.
If the results of the study are favorable, the Company intends to commence to
design, manufacture and market a photo CVD product. See Semiconductor Equipment
Business, below.
Until recently, the Company also was engaged in the technical contract
personnel business through a subsidiary, Echelon Service Company ("Echelon") in
Baltimore, Maryland. In October 1995, the Board of Directors of the Company
determined to dispose of the stock of Echelon in order to allow the Company to
focus on its core semiconductor equipment business. The Company has executed an
agreement with Eugene R. Hartman, Vice President of the Company and the
President of Echelon, to sell all of the stock of Echelon to Mr. Hartman in
exchange for 98,016 shares of Amtech Common Stock held by Mr. Hartman and
additional cash consideration. See Technical Contract Personnel Business, below.
Revenues of the semiconductor equipment business were 60% of total
revenues in fiscal 1995 and generated 81% of the total gross profit while
revenues for the technical contract personnel business were 40% of the Company's
total revenues and generated 19% of its gross profit. See Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations, below.
The Company is dependent for its management and important business
relationships on the active participation of its President, Mr. J. S. Whang and
for general management of the technical contract personnel business on the
services of Mr. Eugene R. Hartman, a Vice President of the Company and Chief
Operating Officer of the technical contract personnel business.
SEMICONDUCTOR EQUIPMENT BUSINESS
General
The Company is engaged primarily in the manufacture and marketing of
several items of capital equipment used by customers in the manufacture of
semiconductors. Semiconductors,
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or semiconductor "chips," are made of silicon and are part of the circuitry of
electronic computers. Their manufacture involves complex operations during which
silicon wafers (the substrates from which chips are made) are inserted in a
diffusion furnace and subjected to the precise flow of gases under very intense
heat. The Company's products are intended to permit its customers to increase
the degree of control over the manufacturing environment and to reduce exposure
to contaminants by reducing the amount of human contact during the process.
Following an industry trend, the size of individual chips has tended to decrease
and the size of the wafers from which chips are made has tended to increase. As
a result, the value of each wafer has increased because each is the source of an
increased number of chips. As the value of wafers increase, so too does the
importance of control over the manufacturing environment.
There is also a trend in the industry, related to the trend to smaller
chips, to the use in new semiconductor manufacturing facilities of newer
technology, vertical diffusion furnaces, which are more efficient to use than
older technology horizontal diffusion furnaces in certain manufacturing
processes of smaller chips on larger wafers. Vertical diffusion furnaces are,
however, significantly more expensive to purchase than horizontal diffusion
furnaces. The Company's products are useable with horizontal diffusion furnaces
only. The Company's target market consists of customers who wish to increase the
efficiency of their existing semiconductor manufacturing facilities equipped
with horizontal diffusion systems. The Company's target market also includes
customers who build new facilities but whose operations do not require the
higher priced vertical diffusion furnace systems. Based on market information
obtained through customer and market contacts, the Company believes that
approximately 70% to 80% of worldwide semiconductor manufacturing facilities are
equipped with horizontal diffusion furnaces and 20% to 30% with vertical
diffusion furnaces. While the Company estimates that over a five-year period the
percentage of facilities in the world equipped with each type of system will
become equal, it believes that a significant demand for its present product line
will continue to exist during that period, although there can be no assurance in
that regard. The Company plans to increase its share of the market by expanding
its product line through the manufacture of horizontal diffusion furnaces, thus
adding to the number and variety of the Company's products and expanding its
sales, marketing and manufacturing in Europe. The expanded manufacturing and
sales operations are located at a leased facility in Hoogeveen, Netherlands. As
further described herein, these changes are expected to result in increased
worldwide sales of the Company's existing products as well as increasing revenue
through sales of its proposed new furnace line.
The Company recently obtained a U.S. patent on technology on which it
expects to base a proposed new photo-assisted CVD product for use in
semiconductor manufacturing facilities, including those equipped with both
vertical and/or horizontal diffusion furnaces. The Company has engaged the
University of California, Santa Cruz, to conduct a study to determine the
feasibility of such a product. If the results of the study are favorable, the
Company intends to design, manufacture and market a photo-assisted CVD product.
The semiconductor equipment business produced approximately 60% of the
Company's total revenues, 81% of its gross profits and 80% of the operating
profits for fiscal year 1995. During fiscal year 1995, approximately 62% of the
semiconductor equipment segment's revenues were derived from the sale of new
systems, including upgrades and retrofits of previously sold
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systems. The remainder of semiconductor equipment revenues (approximately 38%)
was derived from the sale of replacement parts and ancillary items.
Existing Products
Atmoscan(R)
The Company's "Atmoscan(R)" is a patented controlled environment wafer
processing system for use with horizontal diffusion furnaces. It is comprised of
a flanged quartz tube and several metal parts. When in use, the flanged tube is
loaded with wafers and inserted into the diffusion furnace under a nitrogen
controlled environment. The technology protected by the Company's Atmoscan(R)
patents is a processing method that includes a cantilever tube that carries
wafers and through which a purging inert gas flows during the loading and
unloading of wafers into and out of the diffusion furnace.
The Company believes that among the major advantages afforded by the
Atmoscan(R) product are increased control of the environment of the wafers
during the gaseous and heating process, thereby increasing yields and decreasing
manufacturing costs, and a decreased need for the cleaning of diffusion furnace
tubes, which ordinarily involves substantial expense and equipment down time.
Additional significant economies in the manufacturing process are also believed
to result.
The Company has manufactured and sold Atmoscan(R) units to major
semiconductor manufacturers in the United States, the Pacific Rim and Europe,
including at various times to International Business Machines, Intel
Corporation, Samsung, Digital Equipment Corp., Motorola, SGS-Thompson and
others. During fiscal 1995, Atmoscan(R) units were sold in a price range of
approximately $26,000 (for simpler models without accessories or ancillary
items) to approximately $70,000 (for more complex models). As discussed
elsewhere, sales of Atmoscan(R) have declined from their peak in 1989, due to an
industry trend toward use of vertical diffusion furnaces.
The Company has designed and sells an open cantilever paddle system as
an alternative to the closed processing method of the Atmoscan(R). The per unit
price is approximately $13,000-$18,000, depending upon the customer's
specifications.
IBAL
"IBAL" is an acronym for "Individual Boats with Automated Loading."
Boats are quartz trays that hold silicon wafers while they are being processed
in diffusion furnaces. IBAL is a device, including software, which automatically
places boats into Atmoscan(R) tubes or on open cantilever paddle systems before
they are inserted in the diffusion furnace and automatically removes the trays
after completion of the process. The Company has sold units of the IBAL for
approximately $20,000 to $25,000 each, not including the price of the
Atmoscan(R) or open cantilever paddle system. Use of the IBAL products reduces
human handling and, therefore, reduces exposure of wafers to contaminants during
the loading and unloading of the process tubes.
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The IBAL Butler is a robotics device which further automates the
loading of wafers into the diffusion furnace by automatically transferring wafer
carriers onto the IBAL for loading into the Atmoscan(R) for the appropriate
furnace tube. The unit price for the IBAL Butler is approximately $40,000 or on
the open cantilever paddle.
The IBAL Queue provides a convenient staging area for the operator to
place boats on a load station and automates the loading of those boats onto the
IBAL Butler. IBAL Queue was first developed and offered for sale in the fourth
quarter of 1993 and the first unit was shipped during the second quarter of
fiscal 1994. The unit price for the IBAL Queue is $27,000.
Load Stations
The products described above are offered and sometimes sold as a
complete system, mounted on a device called a "load station," which also
includes an ultra-clean environment for wafer loading by filtering and
controlling the flow of air. The Company began shipping load stations in fiscal
1992. The price for the load station alone (in addition to the price for the
component systems described above) is approximately $60,000, depending upon the
complexity of a customer's requirements. Depending on configuration, which
varies from order to order, complete load stations with loaders and IBAL
automation have been sold at prices between $150,000 and $320,000.
Diffusion Furnaces
The Company offers horizontal diffusion furnaces utilizing existing
industry technology for sale to customers who do not require the advanced
automation of, or cannot incur the major expense of acquiring, vertical
diffusion furnaces. While the major advantage of vertical diffusion furnaces is
their susceptibility to increased automation, which decreases the degree of
human intervention in the manufacturing process, the use of horizontal diffusion
furnaces, with less automation, is more economical for larger size chips and
multi-model semiconductor manufacturing. While overall market demand for
horizontal diffusion furnaces is declining, the Company believes that a niche
market will persist. As of the date of this Report, the Company has sold six
furnaces.
The Company has transitioned from being a purchaser of horizontal
diffusion furnaces substantially assembled by suppliers to being a manufacturer.
The Company continues to acquire the frames and covers for furnaces from
subcontractors. This transition is being pursued as part of a plan to increase
both the number and variety of products offered by the Company and to expand its
sales, marketing and manufacturing capabilities. The Company has expended
approximately $1 million in cash in the acquisition of certain assets useable in
the manufacture and sale of horizontal diffusion furnaces and ancillary items to
fund the start-up and operation of an expanded horizontal diffusion furnace
business using such assets. Those assets include items purchased from another
company which had previously acquired the entire business of a bankrupt company,
Tempress B.V., located in the Netherlands. That business involved the
development, manufacture and sale of a number of different products, including a
horizontal diffusion furnace. The Company also acquired from the bankrupt estate
the right to use the trade name "Tempress" in connection with such furnaces. The
right to use the tradename "Tempress" is also held by three subsidiaries of
Tempress in connection with the sale of other
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Tempress products and services unrelated to the horizontal diffusion furnace.
The Company has hired a number of former Tempress technical and sales personnel
to design, manufacture and sell its own furnace products under the "Tempress"
name. The Company believes that the causes of the Tempress bankruptcy were
related to the fact that Tempress was undercapitalized and that large
expenditures were incurred in the development of other products, and was not
related to the quality or reputation of the Tempress products. Accordingly, the
Company believes that a diffusion furnace product designed by former Tempress
product engineers and sold under the "Tempress" name will be accepted by the
Company's targeted market. See Engineering - Research and Development and
Marketing, below.
There is, of course, no assurance of success in the Company's efforts
to design and market horizontal diffusion furnace products. If the Company's
efforts do not succeed, the Company may suffer significant losses. The expanded
manufacturing and sales operations are expected to be located at a leased
facility in Hoogeveen, Netherlands. The Company's ability to carry out its plan
is subject to risk, arising in part from the cyclical nature of the business.
There is a further risk that, as is estimated by at least one market research
firm, the installation of new vertical diffusion furnaces will increase at a
faster rate than is estimated by the Company. In that case, the demand for and
sales of the Company's horizontal diffusion furnaces may be below the Company's
estimates, its revenue and possible earnings may not increase as expected and
the period of start-up losses for the Netherlands operation may extend for a
period longer than the first year.
Proposed New Products
CVD Technology
The Company has patented a certain invention which it believes may be
of significant importance to the semiconductor manufacturing industry. It is now
having a research study conducted to determine the feasibility of developing
semiconductor manufacturing equipment using this patented invention. The
invention relates to an improvement to the photo-assisted CVD process used in
the manufacture of certain semiconductors. The improvement uses ultraviolet
light to activate the deposition reactions rather than heat, which is presently
the common means in commercial CVD processing. This photo-assisted CVD process
is separate and distinct from the diffusion process in which the Company's
existing products are used and its use is not limited to horizontal diffusion
furnace facilities as are the Company's existing products.
A photo-assisted CVD process is potentially attractive for the
manufacture of semiconductors because it allows a less severe processing
environment. First, the photo-assisted CVD processes occur at lower temperatures
and the lower temperature reduces the risk of defects in the deposited
materials. In this process, ultraviolet or UV light is used as the energy source
to effect the deposition of chemicals on the wafers. The photo-assisted CVD
processes also avoid radiation damage which can occur with currently prevalent
processes. Furthermore, photo-assisted CVD processes based on the Company's
patented method are more readily adaptable to the use of larger wafers (the
silicon substrates from which semiconductor chips are made) than other CVD
processes now in use. The trend in the industry is to the use of larger size
wafers and smaller size chips.
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At present, photo-assisted CVD processes are not widely used because
the optical windows through which the UV light is introduced become covered by
the same material that is deposited on the substrates. The window deposition
results in absorption of the UV light before the light can activate further
deposition on the substrates. The window deposition may also significantly
degrade the uniformity of thickness of the deposited material. Although various
other patented techniques have been used to alleviate or remedy this problem,
none of them is believed by the Company to be satisfactory.
UV lights currently available are not sufficiently intense for high
through-put manufacturing. While the Company's technology will not solve the UV
light intensity problem, the second phase of the feasibility study will
investigate available higher intensity light sources. The development of a
higher intensity UV light may increase the market for the product, and such
development may be attempted by the Company.
The concept of the Company's invention is to use a battery of
individually controllable UV lamps, each embedded in an elongated pipe (light
pipe) with its own window. The technology protected by the Company's
photo-assisted CVD patents is described as a processing method that includes the
introduction of inert purging gas into the base of each light pipe opening with
sufficient velocity to flow against reactant gas molecules (which are intended
to be deposited on the wafers) and prevent them from reaching and being
deposited on the window or the lamps, thus avoiding clouding.
The Company has not determined whether a commercially feasible product
can be developed from this technology. The Company has entered into a Research
Agreement with the Regents of the University of California ("University")
whereunder a feasibility study is being undertaken by the University under the
direction of Roger W. Anderson, Ph.D. The study commenced on or about March 14,
1994 and has proven that the Company's patented photo-assisted CVD method solves
the window deposition problem. The study has been extended to February 28, 1996
to confirm the deposition rate and the commercial feasibility of the Company's
potential method.
The total cost of the study to the Company is fixed at $441,620 of
which $355,405 was paid in fiscal 1994. The University is to provide all
necessary facilities. Necessary equipment not on hand will be purchased by the
University out of the Company's payment. The equipment so purchased and the
product prototype, if successfully developed, will remain the University's
property subject to the Company's rights to certain intellectual property
developed from the study and the right to reasonable access to the equipment and
the prototype for customer and other demonstrations. The Company will reimburse
the University the cost of chemicals and supplies consumed in such
demonstrations.
The University has agreed for a period of three years to protect as the
Company's confidential information all information, techniques and methods
developed through the study that are related to the development, design and
construction of the photo-assisted CVD prototype except for (i) information
which is or becomes common knowledge other than through a breach of the
agreement, (ii) information as to the results of the study which does not
disclose the methods whereby the results were achieved, and (iii) information
required to be disclosed by law. The University has the right to publish
information of general scientific and academic
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interest without disclosing any confidential information and a copy of any such
publication is to be furnished to the Company in advance to assure against such
disclosure.
Any new inventions developed out of the study should be the property of
the party whose employee is the inventor. Each party shall have an undivided
interest in any invention made jointly by employees of both parties.
It is acknowledged in the agreement that the University also claims
rights in certain pre-existing intellectual property related to the
photo-assisted CVD process. While it is understood that the Company's patented
technology is to be the primary focus of the study, it is contemplated that
inventions based on the University's claims may result from the study. If so,
the Company will have a period of 90 days after disclosure to it by the
University of such an invention in which to elect to obtain an exclusive,
royalty-bearing license to make, use and sell any such invention first actually
reduced to practice in the performance of the study. If the Company elects to
obtain such a license, it will assume all costs of obtaining and maintaining
patent protection whether or not a patent is actually issued. The parties will
then negotiate in good faith as to the terms of such a license and if no license
agreement is concluded within 120 days of the date the Company elects to obtain
such a license, the Company will no longer have any rights with respect to such
inventions. The parties have agreed that the royalty payable by the Company
under any such license shall be one-half of one percent (0.5%) of the net sales
of products based on a University patent which is an improvement to the
Company's patent and between 2% and 4% on the net sales of products based on
other University inventions. In the case of joint inventions, the royalty rate
is to reflect the relative contribution of the parties to the development of
such inventions.
The agreement expires on February 28, 1996. The agreement may be
terminated by either party if Dr. Anderson becomes unwilling or unable to
continue the study and a mutually acceptable substitute is not available or at
any time by the Company upon 30 days prior written notice to the University.
It is anticipated that, if the results of the University study are
favorable, the Company will design and develop specifications for an initial
photo-assisted CVD device. The initial device is expected to have one
"chamber,"containing a number of light pipes and a pedestal (called a susceptor)
to hold wafers and would be sold to academic and industry research facilities.
If, as expected by the Company, use by such facilities results in acceptance of
the technology by the industry, the Company will attempt to develop a fully
automatic multi-chamber, multi-wafer product for mass production of
semiconductors. The automation (or robotic) components of the product are
expected to be procured from other manufacturers.
The Company's current plans for the proposed new photo CVD product are
conceptual only. Detailed planning is expected to be done if, as and when the
University study demonstrates the product's commercial feasibility. The
development of first a research laboratory product and then an industrial
product is expected to take a period of approximately two to three years.
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The total cost of the photo-assisted CVD product development effort is
expected to be approximately $3,200,000, expended in stages over a two to three
year period. All of the Company's plans and estimates are subject to significant
uncertainties.
Wafer Reclaiming Venture
In November 1995, the Company entered into a joint venture agreement
pursuant to which it acquired a 45% ownership interest and a 50% voting interest
in Seil Semicon, Inc. Seil Semicon, Inc., which is in the preliminary start-up
phase intends to develop and operate a silicon test wafer reclaiming business.
The Company agreed to invest $500,000 in the venture, $250,000 of which was paid
in November 1995 and the remainder of which will be due at the time Seil Semicon
obtains $3 million in third party financing. Seil Semicon has acquired real
property for construction of the reclamation facility. The ultimate success of
the venture depends on a number of factors, including securing adequate
financing, of which there can be no assurance.
Order Backlog
As of November 30, 1995, the Company's order backlog for semiconductor
equipment was approximately $4,980,000 compared to approximately $2,187,000 at
the same date in the previous year. The Company includes in its backlog all
credit approved customer purchase orders. The Company anticipates that
$3,340,000 and $1,640,000 of its current backlog will be shipped in fiscal 1996
and 1997, respectively. Orders in the backlog may be canceled by the customer
upon payment of mutually acceptable cancellation charges. While the current
backlog includes the orders of one customer to be shipped over two fiscal years,
orders generally are shipped within one to six months of receipt. Accordingly,
the backlog may not be a valid measure of revenue for a future period. In
addition, a backlog does not provide any assurance that the Company will realize
a profit from the order.
Manufacturing
The Company purchases quartz and metal components of its products from
competitive market sources and inspects and assembles them at its plant in
Tempe, Arizona. Certain parts of the system are machined at the Company's own
machine shop. With the exception of quartz components, no procurement problems
are currently being encountered nor are any such problems considered likely. The
Company is experiencing long lead-times of four to six months for quartz
components, requiring it to quote longer lead times for certain of its products.
The Company expects to conduct similar assembly operations for its proposed
furnace line at a leased facility in Hoogeveen, Netherlands. If the proposed
photo-assisted CVD product is developed, the Company plans to continue to rely
on suppliers for most parts and to do a small amount of machining work
internally.
Engineering - Research and Development
The Atmoscan(R), was acquired in 1983 through a licensing arrangement
with its inventor, who was not employed by the Company. The other products were
developed by Company personnel. The patented photo-assisted CVD technology was
invented and patent rights assigned to the Company by an employee. The Company
presently employs at its Tempe, Arizona plant, three engineers (including one
with sales support responsibilities) and four technicians. Product
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development in the past has been accomplished in an important part through
cooperative efforts with a key customer and such cooperation is expected to
continue to be a significant element in the Company's future development
efforts. The Company's relationship with that customer are substantially
dependent on the personal relations established by the Company's President, Mr.
Jong S. Whang. It is anticipated that approximately five additional engineers
and technicians will be required for the proposed new photo-assisted CVD product
development effort.
The Company presently employs one engineer and six technicians for its
Netherlands operation. These employees design and support the horizontal
diffusion furnace product line manufactured in the Netherlands.
The Company may from time to time seek to develop or acquire new
products other than those described above to the extent that funds may be
available.
Patents
Generally, the effect of a patent is that the courts will grant to the
patent holder the right to prevent others from making, using and selling the
combination of elements or combination of steps covered by the patent.
The Company has several United States patents on the Atmoscan(R)
system, each reflecting an improvement to or modification of the previous
patent. The two Japanese patents pending on the Atmoscan(R) cover the first two
U.S. patents listed in the table, below.
Other than certain patents on the IBAL automation, neither the IBAL,
cantilever, load stations nor the diffusion furnace products are protected by
patents.
The following table shows the patents granted and the expiration date
thereof and the patents pending for the Company's products in each of the
countries listed below:
Expiration Date or
Product Country Pending Approval
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Atmoscan(R) United States July 10, 2001
Atmoscan(R) United States September 24, 2002
Atmoscan(R) United States July 2, 2002
Atmoscan(R) United States August 30, 2005
Atmoscan(R) Korea May 30, 1999
Atmoscan(R) Japan June 1, 2004
Atmoscan(R) Japan July 18, 2005
Atmoscan(R) European Patent Community
- France July 18, 2004
- Germany July 18, 2004
- United Kingdom July 18, 2004
- Italy July 18, 2004
- Netherlands July 18, 2004
IBAL Cantilever Trolley United States Pending Approval
13
<PAGE>
Expiration Date or
Product Country Pending Approval
- ------- ------- ------------------
Photo CVD United States June 1, 2010
Photo CVD United States November 15, 2011
Photo CVD Japan Pending Approval
The Company's ability to compete may be enhanced by its ability to
protect its proprietary information, including the issuance of patents and
trademarks. While no intellectual property right of the Company has been
invalidated or declared unenforceable, there can be no assurance that such
rights will be upheld in the future. There can be no assurance that in the
future products, processes or technologies owned by others, necessary to the
conduct of the Company's business can be licensed on commercially reasonable
terms.
Marketing
There are two components of the market for the Company's existing
products, which consists of semiconductor manufacturers in the United States,
Western Europe, Taiwan, Korea, Japan and recently the People's Republic of China
and India. One component consists of customers who are installing new
semiconductor manufacturing facilities. The other component consists of
customers who wish to install new equipment systems in existing facilities. The
Company's products have been sold in both components. The market for the
Company's existing products is as described above. The Company intends to
increase its share of that market by adding the horizontal diffusion furnace
manufactured by the Company in its Netherlands facility to its product line and
increasing its sales, marketing and manufacturing capabilities in Europe. This
plan has and is expected to increase revenue not only through sales of a new
product, but to increase sales of other products by permitting the Company to
offer a wider product line, enabling customers to fill more of their needs
through purchases of the Company's products and by permitting the Company to
offer more complete load stations (described above). For example, the Company
expects to generate increased sales of diffusion furnaces because it will offer
them together with Atmoscan(R) and IBAL products. The Company also expects to
obtain orders for its new horizontal diffusion furnace from former Tempress
customers as well as customers in the United States, a large market that had not
been effectively penetrated by Tempress in recent years.
The Company's installed base of customers (facilities at which the
Company's products are installed and operating) includes IBM Corporation,
Motorola, Digital Equipment, Texas Instruments, Intel Corporation, National
Semiconductor, Rockwell International, Phillips, Northern Telecom, SGS-Thomson,
Mitsubishi, Oki, Samsung, Hyundai, UMC and Wuxi China. Of these corporations,
IBM Corporation, Motorola, Digital Equipment, Intel Corporation, SGS-Thomson and
Samsung have been customers of the Company for approximately 11 years.
The Company markets its products by participation in trade shows, by
direct customer contact by the Company's sales personnel (currently the
President and two salesmen in the United States and two sales and marketing
personnel located in the Netherlands) and through independent sales
representatives and distributors. The Company is dependent on its President,
J.S. Whang, for continuing relationships with key customers.
14
<PAGE>
During fiscal 1995, three customers accounted for 28%, 11% and 14%,
respectively, of equipment sales. No other customers accounted for 10% or more
of this segment's sales. For a more complete analysis of significant equipment
customers, see Note (4) of the Notes to Consolidated Financial Statements
included herein (the "Financial Statements").
There are presently eight independent sales representatives, each
covering a specified geographical area on an exclusive basis. The areas now
covered by representatives are the State of Florida, the New England area,
Northern Europe, Central Europe (including Germany), France, India, Italy,
Korea, Taiwan, and the People's Republic of China. Representatives are paid a
commission as specified from time to time in the Company's commission schedule,
which at present is higher for complete units and lower for spare parts and
accessories. Furthermore, a discount is allowed to a customer who is a
manufacturer of diffusion furnaces.
Upon the development of the proposed photo-assisted CVD product, the
Company will seek initially to make sales to customers who have assisted and
will continue to assist in further development. Such customers will probably be
allowed a discount from published prices. Although marketing the new product, if
it is successfully developed, will probably result in an increase in the number
of marketing employees and in advertising and other marketing expense, the
amount cannot now be predicted with any degree of accuracy.
Semiconductor equipment sales generally fluctuate with the level of
capital spending in the semiconductor industry. The semiconductor business is
cyclical.
Competition
The Company is not aware of any significant product which directly
competes with the Atmoscan(R), however, there are several processing systems and
various configurations of existing manufacturing products which provide
advantages similar to those that the Company believes the Atmoscan(R) provides
to semiconductor manufacturers. Notwithstanding the industry trend to the use of
vertical diffusion furnaces (with which Atmoscan(R) is not useable), the Company
believes that a number of customers are and will continue to be willing to buy
Atmoscan(R) units for use with horizontal diffusion furnaces because the
Atmoscan(R) provides better results in terms of more uniform wafer temperature
and dispersion of heated gases in the semiconductor manufacturing process, less
exposure of semiconductor wafers to contaminants, and other technical advantages
which afford to its users a higher yield and, therefore, a lower per item cost
in the manufacture of semiconductors. The Company believes that there are
several products in the market which perform the same functions as the IBAL
automation products, IBAL Atmoscan(R), IBAL Butler and IBAL Queue, but they are
more complex and more expensive. The IBAL products are intended for customers
who do not require the more complex systems. Load stations are sold to customers
that are upgrading their existing facilities with other products of the Company.
These load stations provide a cleaner environment to those they replace and can
reduce the down-time for the upgrade as these load stations were specifically
designed to accept the Company's products without further modification. Products
competitive with the Company's load station are sold by several well-established
firms, larger than the Company. The Company believes, however, that there is a
niche market for its load stations because Atmoscan(R) and IBAL are included as
components. The cantilever system is designed for easy assembly and disassembly
to minimize down-time during maintenance. The Company expects
15
<PAGE>
to sell its horizontal diffusion furnaces to customers who purchase them in
small quantities and that it will maintain a competitive position through its
policy of providing competitive prices and product support services designed for
the customer's specific requirements.
Competition to be expected for the proposed photo-assisted CVD product
cannot now be determined. It should be assumed, however, that others in the
industry are in the process of developing new products and improving existing
ones.
Employees
The Company presently employs 43 people (including the corporate
officers and three contract employees) in its semiconductor equipment business;
16 in manufacturing, 13 in engineering, six in administration, and six in sales
positions. Of these, 27 are employed at the Company's offices and plant in
Tempe, Arizona, and 16 at its facility in Hoogeveen, Netherlands.
TECHNICAL CONTRACT PERSONNEL BUSINESS
DISCONTINUED OPERATIONS--SALE OF ECHELON
General
The Company entered the technical contract personnel business through
the acquisition in 1988, from Mr. James D. Renner, of RTS, Inc. ("RTS"), which
business was principally conducted in the greater Phoenix, Arizona, area, with
operations in Texas and New Mexico. In 1989, a similar business, Echelon Service
Company ("Echelon"), in Baltimore, Maryland, was acquired from Mr. Eugene R.
Hartman. Mr. Hartman is currently a Director of the Company. In 1990, the
Company continued its personnel business expansion through the acquisition of
several businesses in Los Angeles, California known as Martec from Mr. Martin L.
Simons.
In 1992, RTS, Inc. and Martec, together with various wholly owned
subsidiaries, were sold to another company. Under an agreement with the buyer,
the Company agreed not to engage in the temporary personnel business in those
areas until October 1, 1997. The Company's technical contract personnel business
is conducted through a wholly owned subsidiary, Echelon, located in Baltimore,
Maryland. Echelon furnishes technical employees to customers located in
Baltimore and nearby areas (including Baltimore County and the eastern half of
Maryland, Washington, D.C., Northern Virginia and Pennsylvania).
Customers usually employ contract personnel when the estimated period
of their need for the personnel is uncertain or believed to be short term,
generally for periods of approximately six months. This practice reduces the
customers' exposure to increased unemployment tax rates and other adverse
consequences of frequent employee lay-offs, reduces their recruiting expenses
with respect to short term employees, and relieves them of the necessity of
including technical contract personnel in various employee benefit plans.
Arrangements with customers typically specify the Company's charges
(usually a contractually fixed mark-up over the compensation paid to the
technical employee), the amount
16
<PAGE>
and type of insurance to be maintained by the Company (such as workmen's
compensation) and, the administrative functions to be performed by the Company
(such as checking immigration status and processing applications for security
clearances in connection with defense-related employment). The agreements set
forth the terms to be applied if and when personnel are furnished to the
customer; they do not require that the customer employ or that the Company
furnish any personnel.
The contract employee is in all legal respects an employee of the
Company for the time, and under the conditions, specified by the customer. The
Company is responsible for paying the employee, and making appropriate payroll
deductions and payment of proper amounts for income taxes, social security and
the like. Customers are billed on a periodic basis. All direct payroll costs
(employer's social security contributions, unemployment and workmen's
compensation insurance premiums, etc.) are borne by the Company. In addition,
the Company provides certain limited fringe benefits to certain technical
employees who meet criteria in terms of length and, steadiness of employment
with customers. Contract personnel are employed and paid by the Company only
when they are engaged by a customer. Employee compensation is for the most part
determined by negotiated agreements between the Company and the customer and
between the Company and the employee, but in some areas are set by agreement
between the Company's customer and the particular employee.
The gross profit (or margin) of the Company from personnel operations
is the difference between the fee which is paid to the Company by the customer
and the compensation of the technical employee plus direct and indirect payroll
costs paid by the Company. The Company's fee is usually an agreed upon
percentage of the employee's compensation. Variable factors affecting the
earnings of this business are the cost of technical employee fringe benefits,
payroll taxes, certain insurance premium costs to the extent that they can be
influenced by the Company and the Company's related overhead expense. There is
currently a trend to increased unemployment insurance and workers' compensation
costs.
The Company seeks to fill customer requests for specific types of
technical employees with personnel selected on the basis of information
maintained in its files, or with personnel who respond to help-wanted
advertising, active solicitation and referrals. In most cases, the final hiring
decision is made by the customer after conducting individual interviews with
persons, selected by the Company as well as those referred by competitors.
Customers rarely if ever enter into exclusive agreements with any
technical contract personnel supplier. They maintain agreements with several
selected technical contract personnel companies and specific requirements are
usually communicated to all of them.
Source and Availability of Contract Personnel
The Company conducts a continuing recruiting effort to increase the
number of prospective employees who desire to obtain temporary employment
through the Company. This effort is conducted through general advertising in
trade journals, advertising to fill specific positions, active solicitation and
referrals. The Company has not experienced any material difficulties in
recruiting employees qualified to meet customer requirements.
17
<PAGE>
Marketing and Customers
Most of the Company's customers and prospective customers usually
solicit bids or proposals from personnel suppliers by submitting "requirements"
for specific types of personnel on an employee-by-employee basis, with
compensation being negotiated on an individual basis as well. At such times the
Company, if it wishes to seek the business, prepares and submits a proposal to
the customer or prospective customer which covers the fee or mark-up and an
undertaking to comply with customer requirements with respect to insurance and
administrative matters. Company management personnel also seek to answer
customer questions and convey assurances as to the Company's experience and
capabilities in furnishing technical contract personnel and otherwise performing
customer services.
Successful marketing often depends on the ability of individual
management and marketing personnel to create and maintain good relationships
with the customer's personnel management.
During fiscal 1995 and 1994, Martin Marietta accounted for
approximately 14% and 33% of Echelon's revenues, respectively.
Echelon markets itself as being a reliable source of highly skilled
contract engineering talent. As such, many of the customers tend to be
engineering and technology driven companies which require additional personnel
for specific projects. The Company emphasizes maintaining as large a customer
base as possible, in order to minimize the pressure on prices and the volatility
in revenues that sometimes results from being dependent upon one customer.
Seasonality
There is a certain seasonal aspect to the technical contract personnel
business which is caused by the effect of payroll taxes. The Company is
responsible for paying unemployment taxes and the employer's share of social
security taxes. When the maximum amount of such tax is reached for an employee,
the Company no longer makes payments in respect of the employee and its earnings
are thereby increased. Accordingly, the earnings of the technical contract
personnel business are higher during approximately the last three months of the
calendar year (corresponding to the Company's first fiscal quarter) than during
other periods of the year. Payroll taxes tend to be the highest and earnings the
lowest in the first three months of the calendar year (corresponding to the
Company's second fiscal quarter) as this is the period during which the Company
pays unemployment and social security taxes on all employees.
Competition
Competitive factors in the technical contract personnel business are
price (the amount of fee or mark-up over the salary or wage paid to the
technical employee), ability to furnish the type of personnel required by the
customer promptly and the quality of service given to customers. The supplier
with the largest number of qualified prospective technical employees and the
information systems necessary to promptly match their skills and experience to
the job requirements has a competitive advantage. A number of the Company's
competitors are much
18
<PAGE>
larger and better financed than the Company and as a result may be able to offer
lower mark-ups to customers because of economies of scale.
Overhead Personnel
Echelon has a total of five overhead employees, including one each in
management, personnel recruiting, sales, administration and clerical.
Plans to Dispose of Contract Personnel Business
In October 1995, the Board of Directors of the Company determined to
dispose of the contract personnel business in order to allow the Company to
focus on its core semiconductor equipment business. In December 1995, the
Company executed an agreement with Eugene R. Hartman, a Vice President of the
Company and the President of Echelon, to sell all of the stock of Echelon to Mr.
Hartman in exchange for 98,016 shares of Amtech Common Stock held by Mr. Hartman
and additional cash consideration. The total consideration for the Echelon Stock
is valued at approximately $1.2 million. Of that consideration, approximately
$800,000 will be in the form of Amtech Stock and approximately $400,000 will be
in the form of a cash distribution by Echelon to Amtech prior to the sale. To
the extent Echelon does not have enough cash to make the full distribution, the
balance will be paid by assigning receivables to Amtech.
Prior to entering the agreement with Mr. Hartman, the Company sought
and negotiated offers from third parties. However, in the opinion of the Board,
the best offer was tendered by Mr. Hartman. The transaction was conducted at
arms' length, and management does not believe that a better deal could have been
made with unrelated third parties.
As a result of the disposition of Echelon, operation and financial data
related to the contract personnel business are identified as a "discontinued
operation" in the Company's financial statements.
19
<PAGE>
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
The following table shows the amounts of revenue attributable to the
Company's foreign sales for the past three fiscal years (the United States
equipment sales being included in the table for comparison purposes). All
foreign sales were associated with the Company's semiconductor equipment
business and none were to affiliates.
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------- -------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
United States (1) $2,462,852 (36%) $2,472,176 (51%) $2,003,064 (49%)
Far East (2) 3,483,419 (51%) 1,136,432 (26%) 1,798,670 (44%)
Europe (3) 493,786 (7%) 222,376 (5%) 286,152 (7%)
India 424,011 (6%) 500,095 (12%) - (-0%-)
--------- ----- --------- ------ --------- ------
Total $6,864,068 (100%) $4,331,079 (100%) $4,087,886 (100%)
- --------------------
(1) Includes sales in Canada, which are not material.
(2) Includes Korea, Singapore, Taiwan, Japan and the People's Republic of China.
(3) Includes sales in Israel, which are not material.
</TABLE>
For a further description of foreign sales, see Note (4) of the Notes
to the Financial Statements included herein.
ITEM 2. PROPERTIES
The Company's semiconductor equipment business and corporate offices
are located in 9,000 square feet of office and manufacturing space at its
principal address. The facility is leased at a current rate of $3,515 per month
for a term to expire on August 31, 1996.
The Company also leases approximately 2,270 square feet of general
space on a month to month basis in Hoogeveen, Netherlands, at a current rate of
$1,215 per month. This facility will not provide adequate space for the
Company's assembly operations for its furnace line in the second half of fiscal
1996, and accordingly the Company will be required to lease additional space,
which is believed to be available at prevailing lease rates.
If the results of the University study (described above) are favorable
and the Company commences a photo-assisted CVD product development effort, an
additional 2,000 square feet will be required for a laboratory. That laboratory,
together with the Company's existing plant facility will, the Company believes,
be adequate through the first year of the development effort. If and when
commercial production begins, an additional 10,000 square feet of space may be
required. No difficulty is expected in obtaining any additional space at then
prevailing rents.
Echelon leases approximately 1,646 square feet of office space at 7400
York Road, Towson, Maryland, at a current monthly rental of $2,051 the term of
the lease to expire
20
<PAGE>
September 30, 1998. The Company will have no further obligation for these
premises following the disposition of Echelon.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
21
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS' MATTERS
Market Information
The Company's common stock is traded in the over-the-counter market and
is quoted under the symbol "ASYS" in the automated quotation system of the
National Association of Securities Dealers SmallCap Market ("NASDAQ").
The following table sets forth the range of the high and low bid price
for the shares of the Company's common stock for each quarter of fiscal years
1994 and 1995 as reported by the NASDAQ SmallCap Market.
Quarter Ended High Low
------------- ---- ---
Fiscal 1994:
- -----------
December 31, 1993 3.88 2.63
March 31, 1994 3.88 3.00
June 30, 1994 3.50 3.25
September 30, 1994 3.50 2.63
Fiscal 1995:
- -----------
December 31, 1994 4.75 3.38
March 31, 1995 4.38 4.00
June 30, 1995 9.38 4.13
September 30, 1995 9.25 7.25
Holders
As of December 31, 1995, there were 1,527 shareholders of record of the
Company's common stock.
Dividends
The Company has never paid dividends. Its present policy is to apply
cash to investment in product development or expansion; consequently, it does
not expect to pay dividends within the foreseeable future.
22
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth with respect to the Company's
operations for each of the years in the three year period ended September 30,
1995 and with respect to the balance sheets at September 30, 1995 and 1994 are
derived from audited financial statements that have been audited by Arthur
Andersen LLP, independent public accountants, which are included elsewhere in
this Report and are qualified by reference to such financial statements. The
statements of operations for the fiscal years ended September 30, 1992 and 1991
and the balance sheets at September 30, 1993, 1992 and 1991 are derived from
financial statements not included in this Report. The selected financial data
should be read in conjunction with Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations, and the Company's Financial
Statements (and the related notes thereto) contained elsewhere in this Report.
23
<PAGE>
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating Data
Revenues:
Semiconductor Equipment $6,864,068 $4,331,079 $4,087,886 $2,400,777 $2,605,496
Technical Personnel(1) 4,547,860 6,224,205 4,254,594 25,462,462 28,915,660
Total Revenues(1) 11,411,928 10,555,284 8,342,480 27,863,239 31,521,156
Operating Profit by Segment:
Semiconductor Equipment(2) 335,265 87,210 679,869 (417,529) 202,123
Technical Personnel 85,515 223,473 136,280 (678,392) (746,846)
Total Operating Profit (loss) 420,780 310,683 816,149 (1,095,921) (544,723)
Income (Loss) from
Continuing Operations(2) 171,053 (89,469) 302,390 (911,210) (58,812)
Net Income (Loss)(2) $226,568 $94,004 $508,670 $(1,501,070) $(906,436)
Primary Earnings Per Share:(3)(4)
Continuing Operations (loss) $.09 $(.09) $.31 $(.88) $(.06)
Net Income $.12 $.10 $.51 $(1.46) $(.89)
Balance Sheet Data
Working Capital 6,163,304 $2,244,628 $2,722,362 $2,334,623 $2,940,144
Total Assets 8,365,519 3,974,922 4,119,928 6,397,033 6,385,380
Total Liabilities 1,363,291 852,103 1,091,113 3,725,888 2,236,648
Long-Term Debt - - - - -
Accumulated Deficit (891,311) (1,147,338) (1,241,342) (1,750,012) (248,942)
Shareholders' Equity 7,002,228 3,122,819 3,028,815 2,671,145 4,148,732
- -----------------------------------------
(1) A major portion of the Company's technical personnel business was sold
during 1992, resulting in the substantial decrease in revenue from 1992
to 1993.
(2) The results for the fiscal year 1994 include a $355,405 expense for the
University study described elsewhere herein.
(3) The results shown have been restated to reflect the two-for-one
combination or "reverse split" of Common Stock which took place on June
4, 1993.
(4) The results shown would be the same if they were prepared on a
fully-diluted basis, except that the net income per common share for
the fiscal year ended September 30, 1993 would have been $.50.
</TABLE>
For further financial information regarding the Company's business
segments, see Note (10) of the Notes to the Financial Statements included
herein.
24
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As of September 30, 1995 and 1994, cash and cash equivalents amounted
to $834,000 and $737,000, respectively. The $106,000 of net cash provided by
operating activities resulted in the fiscal 1995 increase in cash and cash
equivalents of $97,000, or 13%.
Short-term investments, a capital resource, as well as another source
of liquidity, also increased by $3,328,000 to $3,672,000 as of September 30,
1995. This increase resulted primarily from the $3,623,000 net proceeds from the
public offering. See Note 7 -Stockholders' Investment and Stock Options.
Investments in property plant and equipment, primarily to increase the
production capacity and operating efficiency of the semiconductor equipment
segment and to improve a furnace used for sales demonstration and marketing
purposes, resulted in the expenditure of $328,000 of such proceeds. See the
Consolidated Statements of Cash Flows included herein.
Working capital increased by $3,918,000 to $6,163,000 from $2,245,000,
an increase of 175%, as a result of the net proceeds from the public offering.
The proceeds are substantially invested in U.S. treasury bills and notes and
other short-term investments. For the same reasons, the ratio of current assets
to current liabilities increased to 5.5:1 from 3.6:1.
During March 1994, the Company entered into a research and development
contract with and paid $355,000 to the University of California at Santa Cruz
(the "University"). The University was to develop designs and specifications for
a prototype model of a product embodying the Company's patented photo-assisted
CVD (chemical vapor deposition) process and to prove the feasibility and
demonstrate the practical application of such product. In November, 1995, Amtech
entered into an amendment of its research and development contract with the
University, which expands the Company's financial commitment by $87,000 and
extends the contract through February 28, 1996. The purpose of the amendment is
to confirm the deposition rate of the Company's patented method before
commencing the development of a commercial model of the photo-assisted CVD
reactor at Amtech's facility.
As this study progresses, management will assess the degree of success
achieved and determine how the Company will proceed. If the photo-CVD
feasibility study succeeds in demonstrating the practical commercial application
of the Company's patent, approximately $3,200,000 of liquidity and capital
resources are expected to be expended to develop a commercial model of the
photo-assisted CVD reactor at Amtech's facility and to manufacture and market
the proposed photo-assisted CVD product. This expenditure is expected to be made
in two stages: approximately $1,700,000 for the development of an initial
product suitable for use in research facilities and approximately $1,500,000 for
the development of a product for use in industrial production facilities. The
funds from the cash and short-term investments on hand should be sufficient for
these two stages of development. However, these estimates do not include any
amount for the expansion of facilities for the manufacture of a new
photo-assisted CVD product designed for industrial production facilities. Funds
for that expansion, if any, are expected to be obtained from cash flow from
operations and other possible sources of financing,
25
<PAGE>
such as the possible exercise of the outstanding redeemable common stock
warrants. There is no assurance of the availability or sufficiency of that or
any other source of financing.
Subsequent to the end of fiscal 1995, the Company entered into a joint
venture agreement pursuant to which it would have a 45% ownership interest and a
50% voting interest in Seil Semicon, Inc. in return for a commitment to invest
$500,000 in cash. On November 22, 1995, the Company made an initial $250,000
investment in Seil Semicon, Inc. Upon the receipt by the joint venture of $3
million in third party financing, the Company is obligated to make an additional
$250,000 capital contribution. The joint venture intends to develop and operate
a silicon test wafer reclaiming business through Seil Semicon, Inc., which is in
the preliminary start-up phase. It has acquired real property for construction
of the reclamation facility. The ultimate success of Seil Semicon, Inc. depends
on a number of factors, including securing adequate financing, of which there
can be no assurance.
In addition, the Company plans to either acquire the proprietary rights
to a diffusion furnace controller to be developed by a third-party or to develop
its own. The Company currently purchases its controllers from other furnace
manufacturers. Subject to securing a partial grant from the Netherlands'
government and final approval of the projects specifications, the Company plans
to make a net investment of $165,000 for the acquisition or development of its
own diffusion furnace controller. If successful, of which there can be no
assurance, the Company expects to improve its competitive position and reduce
its cost of sales over the long-term.
Results of Operations
Fiscal 1995 compared to Fiscal 1994
Semiconductor Equipment Business
The revenues of the semiconductor equipment business increased
$2,533,000, or 58%, to $6,864,000 in fiscal 1995 from $4,331,000 in fiscal 1994.
The improvement in revenues is due primarily to the $1,811,000 in sales of
Tempress horizontal diffusion furnaces and related after market parts resulting
from the start-up of manufacturing in the Netherlands. Net revenues of the
domestic operations were 17% higher in fiscal 1995 than in fiscal 1994, due to
continued expansion in the demand by semiconductor manufacturers for production
equipment and upgrades. Because Tempress will be in full operation for all of
fiscal 1996 and due to the increase in the backlog, the Company believes that
products sales may increase in fiscal 1996.
The gross profit of this segment was $2,305,000 for fiscal 1995 versus
$1,561,000 for fiscal 1994, representing a 48% increase. The $744,000 increase
in gross margin primarily results from the start-up of the Netherlands operation
($433,000), volume increases in existing product lines ($260,000), and a
reduction in the material content as a percentage of sales due to a favorable
product mix and increased use of lower cost parts manufactured in-house rather
than purchased from others ($153,000). These increases in gross margin were
partially offset by increases in overhead expenses and a decline in the revenue
and earnings derived from the sale of products manufactured by third-parties.
Gross margin as a percentage of revenue was 34% in fiscal 1995 versus 36% in the
fiscal 1994, with the decline primarily being attributed to the higher fixed
costs in relation to sales associated with the start-up operation in the
Netherlands. Further increases in fixed costs are planned for fiscal 1996 in
order to provide greater manufacturing capacity. However, because of the
expected growth in revenue, gross margins may increase.
The selling, general and administrative costs associated with this
segment were $676,000 (64%) higher in fiscal 1995 as compared to fiscal 1994.
The higher costs are almost entirely
26
<PAGE>
associated with the new operations in the Netherlands. However, selling, general
and administrative costs remained at approximately 25% of revenues during both
fiscal 1994 and 1995.
Prior to fiscal 1994 the Company had made relatively small investments
in product development for a technology business. The Company increased research
and product development expenditures in fiscal 1994 by $257,000 primarily
through the expenditure of $355,405 for the University study to demonstrate the
practical application of the Company's patented photo-assisted chemical vapor
deposition ("CVD") process. During fiscal 1995, research and development costs
consisted entirely of developing the new Tempress line of furnaces, an automated
robot to load cantilever paddle systems, and product improvements. Since the
1994 feasibility study continued through the end of fiscal 1995 without any
further financial commitment required, total research and development costs in
fiscal 1995 were $180,000 lower than in fiscal 1994. If the Company is unable to
acquire the proprietary rights to a furnace controller developed by a
third-party, as planned and as discussed above, research and development costs
could increase in fiscal 1996 by the $165,000 cost, net of government grants, to
develop its own diffusion furnace controller.
Future earnings may decline significantly as the result of increased
photo-assisted CVD development expenses. Depending on the actual timing and
results of the second stage of the feasibility study being conducted by the
University, the Company intends to expend $3,200,000 on research and development
over approximately a three year period in order to develop a commercial product
based upon the Company's patented photo-assisted CVD technology.
Operating profits for the semiconductor equipment segment were $335,000
in fiscal 1995, as compared to $87,000 in fiscal 1994, an improvement of
$248,000. During 1994 and 1995 the Company committed significant capital to the
future growth of this segment; $336,000 in the start-up losses of the
Netherlands operation in fiscal 1995 and $355,405 for the photo-assisted CVD
feasibility study in fiscal 1994. The improvement of this segment's operating
profit for the two years reflects the expansion of the domestic operations,
including increases in revenue, 17%, gross margin, 19%, and operating profit
after excluding the 1994 photo-assisted CVD study, 52%.
Income From Continuing Operations
Income (loss) from continuing operations before income taxes includes
the operating income of the semiconductor equipment segment, discussed above,
general corporate expenses and net interest income, which increased in fiscal
1995 by $248,000, $36,000 and $166,000, respectively, as compared to fiscal
1994. The 14% increase in general corporate expense is principally due to
incentive compensation tied to the completion of the public offering. The growth
in net interest income is due to the investment of $3,328,000 of the $3,623,000
received from the public offering. As a result of these items, the income from
continuing operations before income taxes improved by $378,000, to $261,000 in
fiscal 1995, from a loss of $117,000 in fiscal 1994.
The income from continuing operations is $171,000 for fiscal 1995, an
improvement of $260,000 from the loss of $89,000 in fiscal 1994, after taking
into consideration the income tax
27
<PAGE>
provision of $90,000 in fiscal 1995 and the income tax benefit of $28,000 in
fiscal 1994. The income tax provision for fiscal 1995 approximates the statutory
rate. See Note 3 to the consolidated financial statements for further details
including an analysis of the differences between the statutory rate and the
actual effective rate for fiscal 1994.
The Company's semiconductor equipment segment has been and may in the
future be affected by the following trends. Furnaces used in semiconductor
manufacturing are for the most part horizontal. The use of vertical furnaces is
increasing throughout the industry on a worldwide basis and is expected to
increase in usage and in market share to an estimated 50% over approximately the
next five years as the technology improves. However, the Company continues to
believe that a significant demand for its present product line will exist during
that period, although there can be no assurance in that regard. The reason for
continued expected demand for Atmoscan(R) and horizontal diffusion furnaces is
that, notwithstanding other advantages of vertical systems (e.g. reduced
contamination and the capability to produce more sophisticated semiconductors
more efficiently), for all but very large production runs there is a higher
through-put in horizontal furnaces as compared to vertical furnaces. Also, the
Company's products are often used in upgrading or retro-fitting existing
horizontal furnaces in order to extend their useful life and to avoid the
necessity for the customer to acquire the much more expensive vertical furnaces.
Another important factor is the growth of semiconductor manufacturing using the
less capital intensive horizontal diffusion furnaces in the Peoples Republic of
China, where the Company made its first sale in fiscal 1993, and other less
developed areas, which could further prolong the commercial life of the
Company's existing products.
However, during the current cyclical upturn, demand for the Atmoscan(R)
has not reached the level of the previous high which was in 1989, nor is it
expected to reach that level again in future years because the Atmoscan(R) is
compatible with only horizontal furnaces. Thus future sales volume is dependent
upon the continued introduction of new products, such as IBAL automation
products, or improved versions of products that exist in the market, such as
"clean room" load stations and horizontal diffusion furnaces. The Company
continues to pursue both types of product introductions. The Company's long
range plans include developing, if feasible, a new product based on its patented
photo-assisted CVD technology.
Discontinued Technical Contract Personnel Business
Net revenues of the technical contract personnel segment were
$4,548,000 in fiscal 1995, compared to $6,224,000 in fiscal 1994. Gross margins
generated by these operations in fiscal 1995 and 1994 were $543,000 and
$628,000, respectively, or 12% and 10%, respectively, when stated as a
percentage of revenues. These operations also produced operating profits of
$86,000 and $223,000 for fiscal 1995 and fiscal 1994, respectively.
The 27% decline in the revenues and the 61% decrease in operating
profit of this segment in fiscal 1995 as compared to fiscal 1994 are the result
of the reduction in requirements of this segment's largest customer, to a level
more representative to the years preceding fiscal 1994. The margin percentage
produced by these operations improved 1% due to the permanent placement business
and another 1% because of higher ratio of full service business in relation to
the lower margin, payroll servicing business. General and administrative costs
increased
28
<PAGE>
$34,000 as a result of the inclusion of the permanent placement business for a
full year and by $19,000 primarily from the settlement of a sexual harassment
lawsuit.
In order to concentrate 100% of the Company's management and financial
resources on its core semiconductor segment, Echelon, the only remaining
business in the technical contract personnel business, was sold effective
December 31, 1995. As a result, this segment is designated as discontinued in
the consolidated financial statements. Although the income tax provision
associated with this segment approximates the statutory rate in fiscal 1995, it
is substantially lower in fiscal 1994 due to the resolution of uncertainties.
Due to the sale of Echelon, revenue and operating profit of
discontinued operations for fiscal 1996 will include that business for only one
quarter and thus will be significantly less than in fiscal 1995.
Total Company
Consolidated revenues and total operating profit are summarized for the
past three years in Item 6, Selected Financial Data. Fiscal 1995's consolidated
revenues were only 8% higher, or $11,412,000, compared to $10,555,000 in fiscal
1994, despite the 58% increase in the sales of semiconductor equipment. As
discussed above, this is due to the 27% decline in the revenues of the
discontinued technical contract personnel business. The 35% improvement in the
operating profit, from $311,000 in fiscal 1994 to $421,000 in fiscal 1995, is
primarily a result of growth in revenues and profitability of the domestic
portion the semiconductor equipment segment operations, which is offset by the
start-up losses of the Netherlands operation and the reduction in the profits of
the discontinued technical contract personnel business.
The $166,000 growth in net interest income results from the investment
of $3,328,000 of the $3,623,000 received from the public offering. As a result
of all the above factors, the combined income from continuing and discontinued
operations before income taxes for fiscal 1995 was $347,000, or $241,000
higher, compared with $106,000 in fiscal 1994.
The total income tax provision for the year ended September 30, 1995
approximates the federal statutory rate. The fiscal 1994 tax provision is
significantly less than the 34% federal statutory rate applied to pre-tax income
principally due to the $27,000 benefit from research and development credits. As
of September 30, 1995, the valuation allowance for deferred taxes is $78,000 and
results from the Company's limiting its recognition of state deferred tax
assets, principally state net operating losses which can be carried forward only
five years. Those state deferred tax assets will be recognized to the extent of
Arizona state taxable income in fiscal years 1996 and 1997.
As a result of all of the above factors, net income for fiscal 1995 was
$227,000, or $.12 per share, including $.09 per share from continuing
operations, as compared to $94,000, or $.10 per share, net of a loss of $.09 per
share from continuing operations, in fiscal 1994.
As of November 30, 1995, the Company's order backlog for semiconductor
equipment was approximately $4,980,000 compared to $2,187,000 as of the same
date of the previous year. After deducting the approximately $1,640,000 of the
current backlog that will not ship until
29
<PAGE>
fiscal 1997, there is a 53% increase in the backlog that can be shipped within
one year. Most of the increase in the order backlog and the anticipated growth
in semiconductor equipment revenue is for the new horizontal diffusion furnaces.
Also, while there are exceptions, orders generally are shipped within six months
of receipt. Therefore, growth in equipment sales and income from continuing
operations will depend on how quickly productive capacity for diffusion furnaces
can be expanded and the timing of the receipt of new orders. Another factor that
could significantly affect profitability is the amount of research and
development expenses, if any, incurred for the development of a controller for
diffusion furnaces (if not purchased) and of a model of the photo-assisted CVD
product designed for use in research facilities.
Fiscal 1994 compared to Fiscal 1993
Semiconductor Equipment Business
The revenues of the semiconductor equipment business increased 6% to
$4,331,000 in fiscal 1994 from $4,088,000 in fiscal 1993. The improvement in
revenues was due to the first sales of horizontal diffusion furnaces
substantially assembled by suppliers, and sales to India.
The gross profit of this segment was $1,561,000 for fiscal 1994 versus
$1,595,000 for fiscal 1993, representing a 2% decrease. The recognition of the
deferred EPiC revenue net of the provision for warranty expense accounted for
approximately $130,000 of the fiscal 1993 gross profit. After subtracting the
effects of recognizing the deferred EPiC revenues as described above and in Note
(2) of the Notes to Consolidated Financial Statements, gross margins increased
$96,000, or 6%. Gross margin as a percentage of revenue was 36% in fiscal 1994
versus 37% in the fiscal 1993 after subtracting the effects of the recognition
of the deferred EPiC revenue in fiscal 1993. Most of the improvement in gross
margins results from the higher sales volume discussed above. The primary
factors resulting in the decrease in the adjusted gross margin percentages are
design and pricing errors resulting from the significant growth (80%) in sales
from $2,401,000 in fiscal 1992 to $4,331,000 in fiscal 1994 without sufficiently
increasing the work force.
The selling, general and administrative costs associated with this
segment increased $162,000 (18%) in fiscal 1994 as compared to fiscal 1993. The
primary reasons for this increase are $36,000 of additional travel costs
primarily associated with efforts to expand foreign markets and the $39,000
growth in commission expense primarily related to sales made in India.
Furthermore, bad debt expense increased by $69,000 due to the bankruptcy of an
entity for whose products the Company acted as sales agent.
Until fiscal 1994 the Company had not made expenditures for product
development at a normal level for a technology business. The Company increased
research and product development expenditures in fiscal 1994 by $257,000
primarily through the expenditure of $355,405 for the University study to
demonstrate the practical application of the Company's patented photo-assisted
chemical vapor deposition ("CVD") process.
30
<PAGE>
Operating profits for the semiconductor equipment segment amounted to
$87,000 in fiscal 1994, as compared to $680,000 in fiscal 1993, a decrease of
$593,000. The inclusion of $130,000 of gross profit from the recognition of
deferred EPiC revenue net of related warranty costs and a $141,000 recovery from
patent infringement litigation in the operating income of fiscal 1993 with no
comparable items in fiscal 1994 and the $257,000 increase in research and
development costs in fiscal 1994 account for $528,000 of the decline in
operating profit. The increase in selling, general and administrative costs also
contributed to the decline.
Income From Continuing Operations
In addition to the operating income of the semiconductor equipment
segment, discussed above, income (loss) from continuing operations before income
taxes includes general corporate expenses and net interest income, which were $
$7,000 and $20,000 higher, respectively, in fiscal 1994 as compared to fiscal
1993. The growth in net interest income was due to having the funds resulting
from the fiscal 1993 collection of the Martec and RTS receivables for a full
year. Because of the cost of the photo-assisted CVD project, the operating
profit of the semiconductor equipment segment combined with net interest income
was less than the general corporate expenses for fiscal 1994, resulting in a
loss from continuing operations before income taxes of $117,000, compared to
$462,000 of income from continuing operations in fiscal 1993.
The loss from continuing operations is $89,000 for fiscal 1994, a
$391,000 reduction in earnings from the income of $302,000 in fiscal 1993, after
taking into consideration the income tax benefit of $28,000 in fiscal 1994 and
the income tax provision of $160,000 in fiscal 1993. See Note 3 to the
consolidated financial statements for an analysis of the differences between the
statutory rate and the actual effective rate for fiscal 1994. The income tax
provision for fiscal 1993 approximates the statutory rate of 34%.
Discontinued Technical Contract Personnel Business
Net revenues of the technical contract personnel segment were
$6,224,000 in fiscal 1994, as compared to $4,255,000 in fiscal 1993. Gross
margins generated by these operations in fiscal 1994 and 1993 were $628,000 and
$444,000, respectively, or 10% in each year when stated as a percentage of
revenues. These operations also produced operating profits of $223,000 and
$136,000 for fiscal 1994 and fiscal 1993, respectively.
The 46% increase in the revenues and the 64% increase in operating
profit of this segment in fiscal 1994 as compared to fiscal 1993 are the result
of a continued improvement in the economy in the company's markets and more
importantly the increased requirements of this segment's largest customer. The
margin percentage produced by these operations remained stable despite the
continued competition in the Maryland, Washington D. C., and Pennsylvania
markets. General and administrative costs remained under control.
Total Company
Consolidated revenues and total operating profit are summarized for the
past three years in Item 6, Selected Financial Data. The factors contributing to
fiscal 1994's 27% increase in consolidated revenues to $10,555,000 are discussed
above by segment, particularly under the
31
<PAGE>
technical contract personnel segment. The 62% reduction in the operating profit
from $816,000 in fiscal 1993 to $311,000 in fiscal 1994 are described above by
segment, particularly under the semiconductor equipment segment. General
corporate expenses increased by $7,000, or 3%, due to increased activities
related to attempts to expand the Company's business opportunities.
In fiscal 1992 the Company had net interest expense of $101,000 as
approximately 50% of the RTS and Martec receivables were financed by a bank line
of credit. With the collection of those receivables and repayment of the line of
credit during fiscal 1993, the Company earned net interest income of $36,000 in
fiscal 1993 and $55,000 in fiscal 1994. The higher interest income in fiscal
1994 was due to having the funds resulting from the collection of those
receivables for a full year. As a result, the income from operations before
income taxes for fiscal 1994 amounted to $106,000 compared with $599,000 in
fiscal 1993.
The fiscal 1994 tax provision is significantly less than the 34%
federal statutory rate applied to pre-tax income principally due to the $27,000
benefit of research and development credits and the effects of the settlement of
the tax, penalties and interest assessed in a prior year by the IRS. These items
are partially offset by the $20,000 provision for state income and other less
significant items. As of September 30, 1994, the valuation allowance for
deferred taxes is $150,000 and results from the Company's limiting its
recognition of state deferred tax assets, principally state net operating losses
which can be carried forward only five years. Those state deferred tax assets
will be recognized in future carryforward periods to the extent of state taxable
income.
As a result of all of the above factors, net income for fiscal 1994 was
$94,000, or $.10 per share, as compared to $509,000, or $.51 per share in fiscal
1993.
32
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
Page
Report of Independent Public Accountants.................................... F-1
Financial Statements -
Consolidated Balance Sheets
September 30, 1995 and 1994.............................................. F-2
Consolidated Statements of Operations for
the years ended September 30, 1995, 1994 and 1993........................ F-3
Consolidated Statements of Stockholders'
Investment for the years ended September 30,
1995, 1994 and 1993...................................................... F-4
Consolidated Statements of Cash Flows for
the years ended September 30, 1995, 1994 and 1993........................ F-5
Notes to Consolidated Financial Statements
- September 30, 1995, 1994 and 1993...................................... F-7
Financial Statement Schedule for the years ended
September 30, 1995, 1994 and 1993:
Schedule II - Valuation and Qualifying Accounts.......................... S-1
All Schedules, other than the Schedule listed above, are omitted as the
information is not required, is not material or is otherwise furnished.
33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMTECH SYSTEMS, INC.:
We have audited the accompanying consolidated balance sheets of AMTECH SYSTEMS,
INC. (an Arizona corporation) and subsidiaries as of September 30, 1995 and
1994, and the related consolidated statements of operations, stockholders'
investment and cash flows for each of the three years in the period ended
September 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMTECH SYSTEMS, INC. and
subsidiaries as of September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1995, in conformity with generally accepted accounting principles.
Our audits were made for the purposes of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements and financial statement schedules is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Phoenix, Arizona,
December 6, 1995, except with
respect to the matter discussed
in Note 9, as to which the date
is December 29, 1995.
F-1
<PAGE>
<TABLE>
<CAPTION>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and 1994
1995 1994
----------- -----------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 833,820 $ 736,984
Short-term investments (Note 2) 3,671,569 343,992
Accounts receivable, less allowance
for doubtful accounts of $80,000
in 1995 and $45,000 in 1994 2,286,743 1,541,945
Inventories (Note 2) 524,071 331,935
Deferred income taxes (Notes 2 and 3) 165,000 129,000
Prepaid expenses 45,392 12,875
----------- -----------
Total current assets 7,526,595 3,096,731
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 2):
Leasehold improvements 162,404 124,956
Equipment and machinery 333,971 276,109
Furniture and fixtures 652,607 601,549
----------- -----------
1,148,982 1,002,614
Less- Accumulated depreciation and amortization 499,184 485,426
----------- -----------
649,798 517,188
----------- -----------
PURCHASE PRICE IN EXCESS OF NET ASSETS
ACQUIRED, at amortized cost (Notes 2 and 9) 85,315 91,303
----------- -----------
OTHER ASSETS 103,811 269,700
----------- -----------
$ 8,365,519 $ 3,974,922
=========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 528,322 $ 297,767
Accrued liabilities:
Compensation and related taxes 373,383 250,844
Warranty and installation expenses 116,347 114,390
Other accrued liabilities 120,239 114,102
Income taxes payable (Notes 2 and 3) 225,000 75,000
----------- -----------
Total current liabilities 1,363,291 852,103
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 5, 6, and 8)
STOCKHOLDERS' INVESTMENT (Notes 7 and 9):
Preferred stock; no specified terms;
100,000,000 shares authorized; none issued -- --
Common stock; $.01 par value; 100,000,000 shares authorized;
2,152,851 (945,351 in 1994) shares issued and outstanding 21,529 9,454
Additional paid-in capital 7,872,010 4,260,703
Cumulative foreign currency translation adjustment 29,459 --
Accumulated deficit (920,770) (1,147,338)
----------- -----------
Total stockholders' investment 7,002,228 3,122,819
----------- -----------
$ 8,365,519 $ 3,974,922
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-2
<PAGE>
<TABLE>
<CAPTION>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended September 30, 1995, 1994 and 1993
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
SEMICONDUCTOR EQUIPMENT:
- -----------------------
Net product sales $ 6,864,068 $ 4,331,079 $ 4,087,886
Cost of product sales 4,558,675 2,770,039 2,493,108
----------- ----------- -----------
Gross margin 2,305,393 1,561,040 1,594,778
Selling and general 1,738,344 1,061,852 900,050
Photo-CVD project (Note 8) -- 355,405 --
Other Research and development (Note 2) 231,784 56,573 155,408
Other expense (income) (Note 6) -- -- (140,549)
----------- ----------- -----------
Operating profit 335,265 87,210 679,869
GENERAL CORPORATE EXPENSES 295,683 259,858 252,979
INTEREST INCOME-NET (221,471) (55,179) (35,500)
----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 261,053 (117,469) 462,390
INCOME TAX PROVISION (BENEFIT) (Notes 2 and 3) 90,000 (28,000) 160,000
----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 171,053 (89,469) 302,390
----------- ----------- -----------
DISCONTINUED TECHNICAL CONTRACT PERSONNEL:
- -----------------------------------------
Net revenues 4,547,860 6,224,205 4,254,594
Cost of revenues 4,005,154 5,596,441 3,810,899
----------- ----------- -----------
Gross margin 542,706 627,764 443,695
Selling and general 457,191 404,291 387,914
Litigation and other expense (income) (Note 9) -- -- (80,499)
----------- ----------- -----------
INCOME FROM DISCONTINUED OPERATIONS
BEFORE INCOME TAXES 85,515 223,473 136,280
INCOME TAX PROVISION (BENEFIT) (Notes 2 and 3) 30,000 40,000 (70,000)
----------- ----------- -----------
INCOME FROM DISCONTINUED OPERATIONS 55,515 183,473 206,280
----------- ----------- -----------
NET INCOME $ 226,568 $ 94,004 $ 508,670
=========== =========== ===========
PRIMARY EARNING PER SHARE (Notes 2 and 7):
Income (Loss) From Continuing Operations $ .09 $ (.09) $ .31
Net Income $ .12 $ .10 $ .51
Average Outstanding Shares 1,901,426 964,542 991,262
FULLY DILUTED EARNING PER SHARE (Notes 2 and 7):
Income (Loss) From Continuing Operations $ .09 $ (.09) $ .30
Net Income $ .12 $ .10 $ .50
Average Outstanding Shares 1,901,426 964,800 1,012,694
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
Years Ended September 30, 1995, 1994 and 1993
Cumulative
Common Stock Foreign
-------------------------- Additional Currency Total
Number Paid-In Translation Accumulated Stockholders'
of Shares Amount Capital Adjustment Deficit Investment
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
SEPTEMBER 30, 1992 1,032,490 $ 4,421,157 $ -- $ -- $(1,750,012) $ 2,671,145
Net income -- -- -- -- 508,670 508,670
Repurchase of common
stock (Note 9) (87,500) (151,000) -- -- -- (151,000)
Reclassification of no
par common stock to
$.01 par value (Note 7) 361 (4,260,703) 4,260,703 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
SEPTEMBER 30, 1993 945,351 9,454 4,260,703 -- (1,241,342) 3,028,815
Net income -- -- -- -- 94,004 94,004
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
SEPTEMBER 30, 1994 945,351 9,454 4,260,703 -- (1,147,338) 3,122,819
Net income -- -- -- -- 226,568 226,568
Secondary Public
Offering-Note 7 1,207,500 12,075 3,611,307 -- 3,623,382
Translation adjustment -- -- -- 29,459 -- 29,459
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
SEPTEMBER 30, 1995 2,152,851 $ 21,529 $ 7,872,010 $ 29,459 $ (920,770) $ 7,002,228
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended September 30, 1995, 1994 and 1993
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 226,568 $ 94,004 $ 508,670
Adjustments to reconcile net income to net
cash provided (used) by operating activities-
Depreciation and amortization 144,085 69,395 81,693
Inventory and other asset write-downs 44,796 34,804 39,484
Martec restructuring charge (excess) -- -- (25,485)
Loss on sale or retirement of assets 31,398 1,314 18,017
Bad debt expense, net of write-offs 35,632 -- (20,000)
Deferred tax provision (benefit) (36,000) (19,000) 42,000
Decreases (increases) in operating assets:
Accounts receivable (762,669) 63,525 2,800,434
Inventories and prepaid expenses (261,863) (176,651) 241,330
Other assets 187,970 (211,654) (17,951)
Increases (decreases) in operating liabilities:
Accounts payable 223,091 (101,387) (442,295)
Accrued liabilities 123,063 22,377 (901,995)
Income taxes refundable/payable 150,000 (160,000) 668,000
----------- ----------- -----------
Net Cash Provided (Used) By Operating Activities 106,071 (383,273) 2,991,902
----------- ----------- -----------
INVESTING ACTIVITIES:
Maturities (purchases) of short-term investments - net (3,327,577) 549,285 (893,277)
Purchases of property, plant and equipment (328,257) (476,135) (79,507)
Proceeds from asset sale 19,591 45,342 2,333
----------- ----------- -----------
Net Cash Provided (Used) By Investing Activities (3,636,243) 118,492 (970,451)
----------- ----------- -----------
FINANCING ACTIVITIES:
Net proceeds from public offering (Note 9) 3,623,382 -- --
Net advances (payments) on bank line of credit -- -- (1,500,000)
Repurchase of common stock (Note 9) -- -- (151,000)
----------- ----------- -----------
Net Cash Used By Financing Activities 3,623,382 -- (1,651,000)
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES 3,626 -- --
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (Note 2) 96,836 (264,781) 370,451
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 736,984 1,001,765 631,314
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 833,820 $ 736,984 $ 1,001,765
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ -- $ -- $ 9,259
Income taxes, net of (refunds) 6,000 191,000 (620,000)
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
None None None
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended September 30, 1995, 1994 and 1993
(1) NATURE OF OPERATIONS:
During the three years ended September 30, 1995, Amtech Systems, Inc. and its
subsidiaries (the Company) were in two lines of business. The Company
manufactures equipment used in the semiconductor manufacturing process. In
addition, the Company provided technical contract personnel through its wholly
owned subsidiary, a business that was designated as discontinued in October
1995. See Note 9 regarding discontinued operations.
In August 1994, the Company acquired certain assets including rights to use
the name Tempress from the bankrupt estate of Tempress B.V. and is in the
process of using those assets in the development, manufacture and sale of
horizontal diffusion furnaces in the Netherlands. These operations are being
conducted through the Company's wholly-owned subsidiary, Tempress Systems, Inc.
These financial statements include the results of operations from their
commencement on September 26, 1994.
The Company acquired Echelon Service Company (Echelon) as of April 1, 1989.
These financial statements include the results of operations of Echelon from the
date of acquisition. Since the Company's management has decided to sell the
remaining technical contract personnel operations, the results of those
operations have been segregated as discontinued operations. See Note 9 for
further discussion of the acquisition and sale of this subsidiary.
The Company serves an industry which experiences rapid technological advances
and which in the past has been very cyclical. Therefore, the Company's future
profitability and growth depend on its ability to develop or acquire and market
profitable new products and its success in adapting to future cyclical
reversals, if any.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation - The accompanying statements include the accounts of
Amtech Systems, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition - Revenue is recognized for the semiconductor
manufacturing segment on the accrual basis when the product is shipped and title
passes to the customers. For the technical contract personnel segment, revenue
is recognized on the accrual basis as services are performed by its employees.
Subsequent to September 30, 1992, the Company determined that there were
significant problems relative to certain of its EPiC products shipped in 1992.
The Company determined it would no longer solicit additional EPiC orders.
Approximately $200,000 of 1992 EPiC shipments were recorded as deferred customer
revenue and included in current liabilities as of September 30, 1992.
Approximately $100,000 of 1992 costs associated with these shipments were
classified as product development expenses. During 1993, the Company recognized
these revenues and, based upon the results of its efforts to correct the
problems, established a liability for accrued warranty expenses. As of September
30, 1995, no more EPiC warranty costs are expected and there is no longer a need
for a specific warranty reserve for that product.
Cash Equivalents and Short-term Investments - Cash equivalents consists of
time certificates of deposit and U.S. treasury bills. For purposes of the
consolidated statements of cash flows, the Company considers the certificates of
deposit and treasury bills to be cash equivalents if their maturity is 90 days
or less from purchase. Maturities greater than 90 days are considered short-term
investments, which are recorded at fair value, which approximates cost.
F-7
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Inventories - Inventories are stated at the lower of cost (first-in, first-out
method) or market. The components of inventory as of September 30, 1995 and 1994
are as follows:
1995 1994
-------- --------
Purchased parts $323,215 $280,333
Work-in-progress 181,855 51,602
Finished goods 19,001 --
-------- --------
$524,071 $331,935
======== ========
Property, Plant and Equipment - Maintenance and repairs are charged to expense
as incurred. The costs of additions and improvements are capitalized. The cost
of property retired or sold and the related accumulated depreciation are removed
from the applicable accounts and any gain or loss is recognized.
Depreciation is computed using the straight-line method. Useful lives for
equipment, machinery, leasehold improvements are from three to five years and
are from three to ten years for furniture and fixtures.
Purchase Price in Excess of Net Assets Acquired - The purchase price in excess
of net assets acquired, commonly referred to as goodwill, is being amortized
over periods of five to twenty years using the straight-line method.
Product Development Expenses - The Company expenses product development costs
as they are incurred. The Company incurred approximately $232,000 in 1995,
$412,000 in 1994, and $155,000 in 1993, of expenses related to the improvement
of Atmoscan (Note 6) and development of diffusion furnaces and other products.
Foreign Currency Transactions and Translation - Income for fiscal 1995
includes approximately $11,000 of gains resulting from foreign currency
transactions. There were no foreign currency transactions prior to the
commencement of operations of Tempress Systems, Inc. The functional currency of
Tempress Systems, Inc. is the Netherlands guilder.
Income Taxes - The Company files consolidated federal and state income tax
returns. During 1992, the Company adopted the provisions of the new Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
SFAS No. 109 requires deferred income tax assets and liabilities to be computed
based upon cumulative temporary differences in financial reporting and taxable
income, carryforwards available and enacted tax law. See Note 3.
Income (Loss) Per Common Share - Primary and fully diluted earnings per share
in fiscal 1995 are computed using the modified treasury stock method, because
the number of warrants and options exceed 20% of the common shares outstanding.
For fiscal 1994 and 1993, primary earnings per common share are computed based
on weighted average common and common equivalent shares outstanding determined
using the treasury stock method. For fully diluted earnings per share, in those
years, the number of common equivalent shares used has been calculated assuming
that dilutive options were outstanding the full year and that based upon the
year-end stock price fewer shares could have been repurchased.
Reclassifications - Certain reclassifications have been made to the 1993 and
1994 amounts to conform to the 1995 presentation.
F-8
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(3) INCOME TAXES:
The provision for income taxes on continuing operations consists of:
1995 1994 1993
--------- --------- ---------
Current-
Federal $ 130,000 $ (13,000) $ 140,000
Foreign -- -- --
State 2,000 -- --
--------- --------- ---------
132,000 (13,000) 140,000
--------- --------- ---------
Deferred-
Federal (42,000) (15,000) 20,000
Foreign -- -- --
State -- -- --
--------- --------- ---------
(42,000) (15,000) 20,000
--------- --------- ---------
$ 90,000 $ (28,000) $ 160,000
========= ========= =========
The provision for income taxes is different than the amount which would be
computed by applying the United States corporate income tax rate to the income
before income taxes. The differences are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Tax provision at the statutory rate $ 89,000 $ (40,000) $ 157,000
Effect of expenses not deductible for tax reporting
purposes, primarily amortization of goodwill 13,000 10,000 3,000
State tax provision 54,000 (4,000) 40,000
Research & development credit -- (27,000) --
Change in valuation allowance (52,000) 4,000 (40,000)
Other items (14,000) 29,000 --
--------- --------- ---------
Actual tax provision $ 90,000 $ (28,000) $ 160,000
========= ========= =========
</TABLE>
The components of deferred taxes as of September 30, 1995 and 1994 are as
follows:
1995 1994
--------- ---------
Allowance for doubtful accounts $ 32,000 $ 19,000
Uniform capitalization of inventory costs 34,000 41,000
Inventory write-downs not currently deductible 38,000 21,000
State net operating loss carryforwards 42,000 116,000
Other liabilities not currently deductible 97,000 82,000
Valuation allowance (78,000) (150,000)
--------- ---------
$ 165,000 $ 129,000
========= =========
F-9
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(3) INCOME TAXES: (continued)
In evaluating the probability of realizing its deferred tax assets, the
Company has limited its recognition of deferred tax assets to an amount equal to
the expected federal income tax rate of 34% applied to the cumulative temporary
differences existing at year end. Deferred tax assets attributable to state net
operating losses and the state tax effect of the temporary differences are fully
offset by the valuation allowance.
(4) MAJOR CUSTOMERS AND FOREIGN SALES:
During fiscal 1995, the semiconductor equipment had one major customer which
accounted for 17% of consolidated revenue. During fiscal 1994, the technical
contract personnel segment had one major customer which accounted for 19% of
consolidated revenue. The Company had no other customers which accounted for
more than 10% of consolidated revenues during fiscal years 1993 through 1995.
The Company had customers in each segment which account for more than 10% of
that segment's revenues as follows:
1995 1994 1993
---- ---- ----
Semiconductor equipment manufacturing
segment: 28% 18% 18%
11 14 15
-- 11 --
---- ---- ----
39% 43% 33%
==== ==== ====
Technical contract personnel segment:
14% 33% 16%
-- -- 14
---- ---- ----
14% 33% 30%
==== ==== ====
The individual line items above do not reflect the same customers in each
year.
All foreign sales were associated with the semiconductor equipment segment.
This segment's sales were to the following geographic regions:
1995 1994 1993
---- ---- ----
United States (including 1% or less to Canada) 36% 57% 49%
Far East (Korea, People's Republic of China,
Taiwan, Japan, and Singapore) 51 26 44
Europe (including Israel) 7 5 7
India 6 12 -
---- ---- ----
100% 100% 100%
==== ==== ====
F-10
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(5) LEASES:
The Company leases buildings, vehicles and equipment. Minimum rental
commitments under noncancellable operating leases, all of which expire in the
next three years, are as follows as of September 30, 1995:
1996 $ 83,000
1997 44,000
1998 35,000
--------
$162,000
========
Rental expense, net of sublease income, for 1995, 1994 and 1996 was
approximately $140,000, $119,000 and $99,000, respectively.
(6) PROPRIETARY PRODUCT RIGHTS:
The Company acquired the proprietary product rights to Atmoscan in 1983, which
provides an improved method for the automatic loading of silicon wafers into
diffusion furnaces. The Company has agreed to pay the inventor royalties for 17
years from November 23, 1983. Royalties on sales of complete units of the
product and any spare parts sold are as follows:
Replacement
Unit Sales Parts
---------- -----------
November 1988 - 1993 8% 4%
November 1993 - 2000 4 2
Royalty expense included in cost of product sales of the semiconductor
equipment segment totaled approximately $49,000, $63,000 and $105,000 in 1995,
1994 and 1993, respectively.
The Company had been the plaintiff in a patent infringement action related to
Atmoscan. In 1991, the patent infringement action was settled when the U.S.
District Court ruled that the Company's patent had been infringed upon by the
defendant in the action. The Court ordered the defendant to discontinue
infringing upon the Company's patent. In addition, the Company received a
$140,549 recovery in March 1993, from another defendant in this patent
infringement matter, which has been recorded as other income.
(7) STOCKHOLDERS' INVESTMENT AND STOCK OPTIONS:
Effective with the close of business on June 4, 1993, each two shares of the
no par common stock of the Company was combined and reclassified into one share
of $.01 par value common stock. All shares and per share amounts have been
restated to give effect for this two for one reverse stock split. Any fractional
shares resulting from the reverse split were rounded to the next highest whole
number.
On December 22, 1994, the Company completed a secondary public offering of
1,207,500 shares of its $.01 par value common stock and redeemable warrants for
an equal number of shares. The sale was in the form of units which were
comprised of three (3) shares and three (3) redeemable warrants each, and which
were sold to the public at a price of $11.25 per unit. The gross proceeds from
the public sale amounted to $4,528,125. The net proceeds to the Company, after
deducting all expenses of the offering, were $3,623,382.
F-11
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(7) STOCKHOLDERS' INVESTMENT AND STOCK OPTIONS: (continued)
Each redeemable warrant issued in the offering entitles the holder to acquire
one share of the Company's $.01 par value common stock at an exercise price of
$5.50 per share at any time prior to the December 15, 1999 expiration date. The
redeemable warrants are subject to the Company's right of redemption, under
certain circumstances, at $.05 each during the period in which they are
exercisable. In connection with the public offering, the Company also sold the
underwriting group a warrant ("underwriter's warrant") entitling the group to
purchase 35,000 units at a per unit price of $13.50 during the four year period
ending December 15, 1999. In summary, the total number of shares of $.01 par
value common stock issuable under the redeemable warrants and the underwriter's
warrant are 105,000 at a per share price of $4.50 and 1,312,500 at a per share
price of $5.50.
The Board has reserved a total of 235,000 shares of common stock for use by
the 1983 Incentive Stock Option Plan, which is now expired, and the Amended and
Restated 1995 Stock Option Plan. Incentive stock options issued under the terms
of the plans have or will have an exercise price equal to or great than the fair
market value of the common stock at the date the option was granted. Incentive
stock option grants expire no later than 10 years from the date of grant, with
the most recent grant expiring October 15, 2002. Under the terms of the 1995
Stock Option Plan, nonstatutory options may also be issued. As of September 30,
1995, no options have been granted under the 1995 Stock Option Plan.
The following is a summary of outstanding stock options, 46,500 of which are
exercisable, as of September 30, 1995:
Number of Exercise Expiration
Nature of Options Shares Price Date
------------------- ----------- ------------ -------------
Directors' options 20,000 $2.13-$4.47 90 days after
termination
Incentive Stock Option Plan-
President 7,500 3.52 1996-1998
Other employees 46,000 1.25-5.60 1997-2003
-----------
73,500
===========
The Board of Directors adopted the 1995 Stock Bonus Plan under which grants
for 26,250 have been made to employees of the Company. Under the terms of those
grants, the employees will in fiscal 1996, 1997, and 1998, vest in regards to
9,550, 8,300 and 8,400 shares, respectively. The grants also provide limited tax
protection in the form of a cash bonus in the amount of 40% of the market value
of the shares on the date of the grant. The shares will be issued and the tax
protection paid if the grantee remains an employee through the date on which he
or she becomes vested in those shares. Compensation expense is being recorded
ratably over the vesting period through the accrual of a liability. Such shares
are not reflected in the Consolidated Statements of Stockholders' Investment
because the shares have not been issued, pending vesting.
(8) COMMITMENTS AND CONTINGENCIES:
During March 1994, the Company entered into a research and development
contract with and paid $355,405 to the University of California at Santa Cruz
(the "University"). That amount was expensed in fiscal 1994. The Company's
purpose for entering into the contract is to attempt to prove the feasibility
and demonstrate the practical application of the Company's patented
photo-assisted chemical vapor deposition ("CVD") process. The University has
developed designs and specifications for a prototype model of a product
embodying the
F-12
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(8) COMMITMENTS AND CONTINGENCIES: (continued)
Company's technology and used it to conduct the initial study. In November 1995,
the company amended its contract to extent its term to February 28, 1996, and
increase its financial commitment to the research by $87,000, which will be
expensed in fiscal 1996. The purpose of the contract amendment is to prove that
deposition rates that are satisfactory for commercial applications can be
achieved with the Company's patented method. Assuming the feasibility of the
proposed photo CVD product, the Company expects to expend approximately
$3,200,000 for its development. The expenditure is expected to be made in two
stages: approximately $1,700,000 for the development of an initial product
suitable for use in research facilities and approximately $1,500,000 for the
development of a product for use in industrial production facilities. These
estimates do not include any amount for the expansion of facilities for the
manufacture of a new photo CVD product designed for industrial production
facilities. Funds for that expansion, if any, are expected to be obtained from
cash flow from operations and other sources of financing. There is no assurance
of the availability or sufficiency of such sources.
Subsequent to September 30, 1995, the Company entered into a joint venture
agreement pursuant to which it would have a 45% ownership interest and a 50%
voting interest in Seil Semicon, Inc. in return for a commitment to invest
$500,000 in cash. The joint venturers plan to operate a silicon test wafer
reclaiming business through Seil Semicon, Inc., which is in the start-up phase.
The ultimate success of Seil Semicon, Inc. depends on a number of factors,
including securing adequate financing, of which there can be no assurance.
(9) DISCONTINUED TECHNICAL CONTRACT PERSONNEL SEGMENT:
The Company entered the technical contract personnel segment in 1988 with the
purchase of RTS, Inc. and its affiliates (RTS). In 1989, the Company acquired
Echelon Service Company. Martec Resources, Inc., Martec Payroll Services, Inc.
and affiliates (collectively Martec) were acquired effective April 2, 1990. All
of these acquisitions were culminated using stock and cash at closing as
consideration, as well as certain incentive arrangements payable in cash and
stock to the former owners. The former owners also became employed under the
terms of their respective employment contracts.
On March 6, 1991, the Company terminated for cause the employment of the
president (and former owner) of Martec. Martec's former president filed a demand
for arbitration as a result of his termination by the Company, seeking damages
of more than $500,000. Although the Company believes that the termination of
employment was proper and justified, the Company attempted to settle this matter
to avoid further litigation. The expected settlement amount, and the related
legal fees involved with the arbitration, were recorded as litigation and other
expenses totaling $469,677 in 1992. On March 26, 1993, a definitive settlement
agreement was signed resolving all outstanding claims between the parties. The
settlement involved the payment of $312,500, $161,500 of which was for release
of all claims against the Company and $151,000 for his return of 87,500 shares
of common stock to the Company. The total actual costs were $25,485 less than
expected in 1992 and the reversal of the accrual is included in other income in
1993.
On September 30, 1992, the Company sold substantially all operations related
to RTS and Martec. Upon winding up the affairs of RTS and Martec the Company
realized $55,014 more than the carrying value of the net assets retained, which
has been included in other income of discontinued operations in 1993.
The "discontinued technical contract personnel" results reflected in the
consolidated statements of operations for the three years ended September 30,
1995 are those of Echelon. As of September 30, 1995 and 1994,
F-13
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(9) DISCONTINUED TECHNICAL CONTRACT PERSONNEL SEGMENT: (continued)
goodwill net of accumulated amortization related to the acquisition of Echelon
amounted to $85,315 and $91,303, respectively. Effective December 29, 1995, the
Company's management entered into a contract to sell Echelon to its former
owner, who is a director of the Company. Specifically, the Company is disposing
of approximately $550,000 in assets and $90,000 in liabilities and in return
will receive shares of the Company's $.01 par value common stock having a market
value of approximately $800,000.
(10) BUSINESS SEGMENT INFORMATION:
The Company operates in two specific business segments: semiconductor
manufacturing equipment and the technical contract personnel business. The
following tables summarize and supplement the segment information presented in
the accompanying financial statements for the three years ended September 30,
1995, and as of the last day of those fiscal years:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Semiconductor Manufacturing Equipment $ 6,864,068 $ 4,331,079 $ 4,087,886
Technical Contract Personnel Services (C) 4,547,860 6,224,205 4,254,594
----------- ----------- -----------
Consolidated revenues $11,411,928 $10,555,284 $ 8,342,480
=========== =========== ===========
OPERATING PROFIT (A):
Semiconductor Manufacturing Equipment $ 335,265 $ 87,210 $ 679,869
Technical Contract Personnel Services (C) 85,515 223,473 136,280
----------- ----------- -----------
Total operating profit $ 420,780 $ 310,683 $ 816,149
=========== =========== ===========
IDENTIFIABLE ASSETS:
Semiconductor Manufacturing Equipment $ 3,188,680 $ 1,988,046 $ 1,503,024
Technical Contract Personnel Services (C) 608,508 775,505 682,094
General Corporate - See (B) below 4,568,331 1,211,371 1,934,810
----------- ----------- -----------
Total assets $ 8,365,519 $ 3,974,922 $ 4,119,928
=========== =========== ===========
DEPRECIATION AND AMORTIZATION:
Semiconductor Manufacturing Equipment $ 129,544 $ 51,632 $ 49,713
Technical Contract Personnel Services (C) 14,541 17,763 31,980
----------- ----------- -----------
Total depreciation and amortization $ 144,085 $ 69,395 $ 81,693
=========== =========== ===========
CAPITAL EXPENDITURES:
Semiconductor Manufacturing Equipment $ 324,119 $ 460,313 $ 63,383
Technical Contract Personnel Services (C) 4,138 15,822 16,124
----------- ----------- -----------
Total capital expenditures $ 328,257 $ 476,135 $ 79,507
=========== =========== ===========
(A) See the Consolidated Statements of Operations and related notes for
details of infrequently occurring items included in operating income.
(B) General Corporate is primarily excess cash, cash equivalents, short-term
investments and tax assets.
(C) See Note 9 regarding the discontinuance of the Technical Contract
Personnel business segment.
</TABLE>
F-14
<PAGE>
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
-----------------------------------------------------
Additions
For the Year Balance at Charged
Ended Beginning (Credited) Balance at
September 30, of Year to Expense Write-offs End of Year
- --------------- --------- --------- ---------- -----------
1. Allowance for Doubtful Accounts
1995 $ 45,000 $ 35,704 $ 704 $ 80,000
1994 45,000 73,720 73,720 45,000
1993 65,000 1,569 21,569 45,000
2. Deferred Tax Asset Valuation Allowance
1995 $ 150,000 $ (72,000) $ -- $ 78,000
1994 150,000 -- -- 150,000
1993 256,000 (106,000) -- 150,000
S-1
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
34
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to
the Company's Notice of Meeting and Proxy Statement to be filed in connection
with the Company's Annual Meeting of Shareholders anticipated to be held on or
about February 29, 1996.
ITEM 11. MANAGEMENT REMUNERATION
The information required by this Item is incorporated by reference to
the Company's Notice of Meeting and Proxy Statement to be filed in connection
with the Company's Annual Meeting of Shareholders anticipated to be held on or
about February 29, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by reference to
the Company's Notice of Meeting and Proxy Statement to be filed in connection
with the Company's Annual Meeting of Shareholders anticipated to be held on or
about February 29, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
the Company's Notice of Meeting and Proxy Statement to be filed in connection
with the Company's Annual Meeting of Shareholders anticipated to be held on or
about, February 29, 1996.
35
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements.
The following is a list of all financial statements filed as a part of
this Report:
1. Consolidated Balance Sheets - September 30, 1995 and 1994
2. Consolidated Statements of Operations for the years ended
September 30, 1995, 1994 and 1993
3. Consolidated Statements of Stockholders' Investment for the
years ended September 30, 1995, 1994 and 1993
4. Consolidated Statements of Cash Flows for the years ended
September 30, 1995, 1994 and 1993
5. Notes to Consolidated Financial Statements -
September 30, 1995, 1994 and 1993
(b) Financial Statement Schedules
The following is a list of a financial statement schedule required to
be filed as a part of this Report:
1. Schedule II - Valuation and Qualifying Accounts
All schedule other than the Schedule listed above, are omitted as the
information is not required, is not material or is otherwise furnished.
36
<PAGE>
<TABLE>
(c) Exhibits.
<CAPTION>
Method
Exhibit No. Description of Filing
----------- ----------- ---------
<S> <C> <C>
10.1 Articles of Incorporation A
10.2 Articles of Amendment to Articles of Incorporation, dated A
April 27, 1983
10.3 Articles of Amendment to Articles of Incorporation, dated B
May 19, 1987
10.4 Articles of Amendment to Articles of Incorporation, dated C
May 2, 1988
10.5 Articles of Amendment to Articles of Incorporation, dated G
May 28, 1993
10.6 Amended and Restated Bylaws D
10.7 Incentive Stock Option Plan A
10.8 J.S. Whang Stock Option Agreement A
10.9 Product Acquisition Agreement A
10.10 Lease with Elias Paul, dated April 27, 1991 D
10.11 Stock Purchase Agreement with David J. McGrath, Jr., E
dated September 30, 1992
10.12 Asset Purchase Agreement with TAD Technical Services E
Corporation, dated September 30, 1992
10.13 Settlement Agreement with the Committee to Protect F
Shareholder Interests, dated August 25, 1992
10.14 Employment Agreement with Robert T. Hass, dated May G
19, 1992
10.15 Registration Rights Agreement with J.S. Whang, dated H
January 24, 1994
10.16 Employment Agreement with J.S. Whang, dated October H
1, 1994
10.17 Research Agreement with The Regents of the University *
of California dated March 1, 1994, together with
amendments thereto dated March 1, 1994, March 30,
1994, March 7, 1995, June 26, 1995, October 16, 1995,
November 29, 1995, and December 4, 1995
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Method
Exhibit No. Description of Filing
----------- ----------- ---------
<S> <C> <C>
11 Schedule of Computation of Net Income per Share I
22 Subsidiaries of the Registrant *
24 Powers of Attorney See Signature
Page
</TABLE>
- ------------------------
* Filed herewith.
A Incorporated by reference to the Company's Form S-18 Registration
Statement No. 2-83934-LA
B Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1987
C Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1988
D Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1991
E Incorporated by reference to the Company's Current Report on Form
8-K, dated October 14, 1992
F Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1992
G Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993
H Incorporated by reference to the Company's Form S-1 Registration
Statement No. 33-77368
I Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994
(d) Reports on Form 8-K
The Company did not file a Current Report on Form 8-K during the fourth
quarter of fiscal year 1995.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMTECH SYSTEMS, INC.
January 12, 1996 By /s/ Jong S. Whang
-------------------
Jong S. Whang, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints JONG S. WHANG and ROBERT T. HASS, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Form 10-K Annual
Report, and to file the same, with all exhibits thereto, and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully and to all intents and purposes as he might
or could do in person hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Jong S. Whang Chairman of the Board, January 12, 1996
- ------------------------------------- President (Chief Executive Officer)
Jong S. Whang
/s/ Robert T. Hass Vice President-Finance January 12, 1996
- ------------------------------------- (Chief Financial & Accounting Officer)
Robert T. Hass
/s/ Donald F. Johnston Director January 12, 1996
- -------------------------------------
Donald F. Johnston
/s/ Eugene R. Hartman Director January 12, 1996
- -------------------------------------
Eugene R. Hartman
/s/ Alvin Katz Director January 12, 1996
Alvin Katz
/s/ Bruce R. Thaw Director January 12, 1996
- -------------------------------------
Bruce R. Thaw
</TABLE>
39
RESEARCH AGREEMENT (And Amendments)
This Research Agreement ("Agreement") is entered into by and
between AMTECH SYSTEMS INC. ("Sponsor") and THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA ("University"), a nonprofit educational institution incorporated
under the laws of the State of California.
Witnesseth
WHEREAS, Sponsor possesses an ownership interest in United
States Patent No. 5,215,588 entitled "Photo-CVD System" and issued on June 1,
1993 to Ji H. Rhieu of Mesa, Arizona; and
WHEREAS, Sponsor claims existing rights in intellectual
property under continuation-in-part to U.S. Patent No. 5,215,588, Patent
Application Serial No. 08/067,286, filed on May 25, 1993 (hereinafter referred
to as Method A); and
WHEREAS, University claims existing rights in intellectual
property whose conception occurred before the period covered by this Agreement,
is included in disclosure UC Case No. 93-338-1, and is entitled "Parallel Purge
Configuration for Photo-CVD Process (UCSC B)" (hereinafter referred to as Method
B); and
WHEREAS, University claims existing rights in intellectual
property whose conception occurred before the period covered by this Agreement,
is included in disclosure UC Case No. 93-338-1, and is entitled "Perpendicular
Purge Configuration for Photo-CVD Process (UCSC C)" (hereinafter referred to as
Method C); and
WHEREAS, the research project contemplated by this Agreement
is of mutual interest and benefit to University and to Sponsor, will further the
instructional, scholarship and research objectives of University in a manner
consistent with its status as a nonprofit, tax-exempt, educational institution,
and is intended to further the business objectives of Sponsor and to provide
benefits to Sponsor through the actual reduction to practice of Method A under
this Agreement; and
WHEREAS, in this Agreement the term Improvement Invention
shall mean any patentable invention owned by the University which includes or
broadens one or more of the claims in Method A and which is conceived and first
actually reduced to practice during the course of performing the research under
this Agreement; and
WHEREAS, it is anticipated that University will, as a result
of the research project, design and build a Photo-CVD (chemical vapor
deposition) prototype and it is intended that Sponsor shall receive certain
rights to such prototype in accordance with the terms of this Agreement; and
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto agree to the following:
1. Research Work
1.1 University shall use reasonable efforts to perform
the Research described in Exhibit A hereto which is
incorporated herein, (hereinafter referred to as the
"RESEARCH"), under the direction of Roger W. Anderson
as "Principal Investigator," substantially in
accordance with the terms and conditions of this
Agreement. Anything in this Agreement to the contrary
notwithstanding, Sponsor and University may at any
time amend the RESEARCH by mutual written agreement.
1.2 In the event that the Principal Investigator becomes
unable or unwilling to continue the RESEARCH, and a
mutually acceptable substitute is not available,
University or Sponsor shall have the option to
terminate this Agreement.
1.3 University shall provide all necessary facilities to
properly and fully perform the RESEARCH and to
construct and test the Photo-CVD prototype.
2. Period of Performance
2.1 The period of performance of this Agreement is March
1, 1994 through April 30, 1995. This Agreement shall
become effective upon the date of last signature
hereto and shall continue in effect for the full
duration of the period of performance unless sooner
terminated in accordance with the provisions of
Article 9. Notwithstanding the effectiveness of the
Agreement as described herein paragraphs 4.3 and 6.1
shall continue in effect for the periods stated
herein.
3. Reports
3.1 University shall furnish Sponsor letter reports in
such frequency as mutually agreed to by the parties,
but no less than monthly, summarizing the work
conducted. In addition, on no less than a quarterly
basis, University and Principal Investigator shall
provide oral presentations in person as to the status
of the RESEARCH to Sponsor and Sponsor's guests at
the site of the RESEARCH or at Sponsor's offices at
Sponsor's request. A final report setting forth the
accomplishments and significant research findings,
equipment development and plans shall be prepared by
University and submitted to Sponsor within thirty
(30) days of the expiration of the Agreement.
4. Costs, Billings and Other Support
4.1 It is agreed to and understood by the parties hereto
that, subject to Article 2, total costs to the
Sponsor hereunder shall not exceed the amount of
$360,549. Payment shall be made by Sponsor on a
reasonable cost reimbursable basis monthly in arrears
upon submission of invoices by the University in
accordance with the schedules attached hereto as
Exhibit B. Invoices submitted by the University shall
not vary by more than five percent (5%) of the
attached schedules on a quarterly basis.
4.2 Checks shall be made payable to The Regents of the
University of California and sent to:
University of California, Santa Cruz
Cashier's Office
102 Hahn Student Services
Santa Cruz, CA 95064
4.3 In the research, development, planning and
construction of a photo enhanced CVD prototype used
in the processing and manufacturing of semiconductor
devices, and in other aspects of the RESEARCH, the
equipment and machinery utilized therein shall
primarily be provided by Sponsor through the funding
of the RESEARCH as described in paragraph 4.1 hereof.
In addition, University may be required to utilize
some equipment for certain of the components of the
prototype and in other aspects of the RESEARCH.
Although the University shall retain title to any
such equipment and the prototype, it shall be subject
to the rights of Sponsor to retain the intellectual
property rights derived from the RESEARCH and other
rights outlined in Articles 5 and 8 hereof.
University shall maintain in good working order and
condition the equipment and CVD prototype and shall
provide Sponsor with the right of access and
noncommercial use of the equipment and prototype on
at least a monthly basis for a two year period
commencing with the termination of this Agreement.
Sponsor shall reimburse University for the cost of
chemicals and supplies necessary to process samples
for the purpose of demonstrating the equipment and
prototype during the period of access by Sponsor.
4.4 In the event of termination of this Agreement by
Sponsor pursuant to Article 9 hereof, Sponsor shall
pay all costs accrued by University as of date of
termination, including noncancellable obligations.
5. Publicity and Business Development
5.1 University understands and agrees that Sponsor is a
public corporation and will inform its shareholders
and issue a news release that it has entered into
this Research Agreement with University for the
RESEARCH as described on Exhibit A and for the
development, design and construction of
photo-enhanced CVD equipment and machinery used in
the processing and manufacturing of semiconductor
devices. Sponsor shall have the right to visit the
site of the RESEARCH at the University and to
demonstrate any achieved results of the RESEARCH and
the development, construction and use of the
Photo-CVD equipment and machinery developed by
University. Principal Investigator will cooperate
with Sponsor in this endeavor. Sponsor shall agree
that such visits to the research site shall be on a
reasonable basis and will not exceed more than one
visit per month.
5.2 With the exception of informing shareholders and
issuing news releases as described in paragraph 5.1,
nothing in this Agreement shall entitle Amtech to use
the University's name, nor any employee of
University, in any publicity or advertising without
the prior written approval of University. University
will not use the name of Sponsor, nor any employee of
Sponsor, in any publicity without the prior written
approval of Sponsor.
6. Confidentiality
6.1 University agrees that information, techniques and
methods obtained in and through the RESEARCH and
related to the development, design and construction
of the Photo-CVD prototype shall be considered
Confidential Information. Such Confidential
Information whether provided by Sponsor or
independently developed by University which is not
specifically excepted in paragraph 6.2 hereof, shall
be held in strict confidence for the term of this
Agreement and for a period of three (3) years after
its termination. University agrees to safeguard such
Confidential Information against disclosure to others
with the same degree of care as it exercises with its
own information of a similar nature. University will
take all reasonable efforts to prevent disclosure to
third parties of such Confidential Information.
6.2 University shall not be required to keep confidential
the following: (1) information which is now common
knowledge or subsequently becomes such through no
breach of this Agreement; (2) information which
reveals the results of the RESEARCH without
disclosing the methods by which the results are
obtained; or (3) information which is required to be
disclosed by law.
7. Publications
7.1 University shall have the right to publish research
information of general scientific and academic
interest so long as said publications do not reveal
information University agrees to keep confidential
pursuant to Article 6. University shall furnish
Sponsor with a copy of any proposed publication at
least sixty (60) days prior to submission for
publication. Sponsor within thirty (30) days of
receipt of the proposed publication shall determine
if said proposed publication reveals Confidential
Information of Sponsor or would otherwise violate
this Agreement. In the event Sponsor determines that
its Confidential Information is disclosed in such
publication, it shall notify University and such
information will be removed from the publication.
Unless Sponsor notifies University within said thirty
(30) day period, University shall have the right to
submit said publication.
8. Intellectual Property Rights
8.1 Ownership of Inventions
-----------------------
Any patentable invention or discovery invented solely
by employees of University arising from research
conducted under this Agreement shall be the sole
property of University and shall be disposed of in
accordance with University's policies subject to the
terms of this Agreement. Any patentable invention or
discovery invented solely by employees of Sponsor
arising from research conducted under this Agreement
shall be the sole property of Sponsor and shall be
disposed of in accordance with Sponsor's policies
subject to the terms of this Agreement.
For any invention or discovery jointly invented by
University and Sponsor arising from research
conducted under this Agreement, each party shall, in
accordance with the patent laws of inventorship, own
an undivided interest in the invention. Any and all
joint inventions shall be fully and promptly
disclosed in writing and in confidence to the other
party. The parties agree to consult with one another
prior to taking any action to obtain patent
protection of such joint invention and shall attempt
to agree on patent applications to be filed and such
invention to be administered.
Inventorship shall be determined in accordance with
U.S. patent laws.
8.2 Licensing Rights to University Inventions
-----------------------------------------
Unless it is determined by a court of competent
jurisdiction that University is unable to do so and
provided that Sponsor pays the full costs of the
research project supported by this Agreement as set
forth in the schedules attached hereto as Exhibit B,
Sponsor shall be given a time-limited first right to
negotiate an exclusive, royalty-bearing license to
make, use and sell any patentable invention which is
either 1) both (a) included in Method B or Method C
and (b) first actually reduced to practice in the
performance of research under this Agreement
("Research Invention") or 2) conceived and first
actually reduced to practice in the performance of
research under this Agreement. This license right
shall exclude those using laser or rare gas halogen
excimer light sources. It is specifically understood
and agreed that Method A shall be the primary focus
of this RESEARCH.
University shall promptly disclose to Sponsor in
writing and in confidence any such invention or
discovery arising under this Agreement; Sponsor shall
notify University in writing within ninety (90) days
of disclosure to Sponsor whether or not it wishes to
secure a commercial license to such invention. If
Sponsor elects to secure a license, Sponsor shall
assume all costs associated with securing and
maintaining patent protection from the date of
disclosure through the term of the license for such
invention(s), whether or not Letter Patent issues.
The parties shall negotiate in good faith said
license, which shall include, but not be limited to:
o reasonable terms;
o diligence requirements which are no more
restrictive than performance by Sponsor to
market the product under such license in
countries including the United States within
twenty-four (24) months of the date of full
execution of such license and in quantities
sufficient to meet the market demands
therefor; and
o Sponsor's continuing obligation to pay patent
costs.
Sponsor shall have an additional one hundred twenty
(120) days from the date of election to conclude a
license agreement with University. If Sponsor does
not elect to secure such license or if such license
agreement is not concluded in said period, rights to
the inventions disclosed hereunder shall be disposed
of in accordance with University policies with no
further obligation to Sponsor.
Further, the earned royalty rate in any such license
to an invention which is an Improvement Invention
shall be one-half percent (0.5%) of Net Sales of all
products sold under the license. In addition, the
earned royalty rate in any such license to an
invention which is a Research Invention shall be not
less than two percent (2%) and not more than four
percent (4%). For Research Inventions which are
jointly owned, the specific royalty rate shall
reflect the relative contributions of the Sponsor and
the University to such joint inventions. Net Sales
shall mean the total of the gross invoice prices of
Licensed Product sold less the sum of the following
actual and customary deductions where applicable:
cash, trade, or quantity discounts, sales, use,
tariff, import/export duties or other excise taxes
imposed upon particular sales; transportation charges
and allowances or credits to customers because of
rejections or returns.
8.3 Nothing contained in this agreement shall be deemed
to grant either directly or by implication, estoppel,
or otherwise any rights under any patents, patent
applications or other proprietary interests, whether
dominant or subordinate, or any other invention,
discovery or improvement of either party, other than
the specific patent rights covering inventions
arising under this Agreement.
9. Termination
9.1 Either party may terminate this Agreement upon thirty
(30) days prior written notice to the other.
9.2 Termination of this Agreement by either party for any
reason shall not effect the rights and obligations of
the parties accrued prior to the effective date of
termination. No termination of this Agreement,
however effectuated, shall affect the University's or
Sponsor's rights and obligations under Article 8
thereof, or release the parties hereto from their
rights and obligations under Articles 4, 5, 6, 7, 8
and 10.
10. Independent Contractor
10.1 In the performance of all services hereunder:
10.1.1 University shall be deemed to be and shall
be an independent contractor and, as such,
University shall not be entitled to any
benefits applicable to employees of Sponsor.
10.1.2 Neither party is authorized or empowered to
act as agent for the other for any purpose
and shall not on behalf of the other enter
into ny contract, warranty, or
representation as to any matter. Neither
shall be bound by the acts or conduct of the
other.
11. Insurance and Indemnification
11.1 University warrants and represents that University
has adequate liability insurance, such protection
being applicable to officers, employees and agents
while acting within the scope of their employment by
University, and University has no liability insurance
policy as such that can extend protection to any
other person.
11.2 University shall defend, indemnify and hold Sponsor,
its officers, employees, or agents harmless from and
against any and all liability, loss, expense,
attorneys' fees or claims for injury or damages
arising out of the performance of this agreement, but
only in proportion to and to the extent such
liability, loss, expense, attorneys' fees, or claims
for injury or damages are caused by or result from
the negligent or intentional acts or omissions of
University, its officers, agents, or employees.
11.3 Sponsor shall defend, indemnify and hold University,
its officers, employees, or agents harmless from and
against any and all liability, loss, expense,
attorneys' fees or claims for injury or damages
arising out of the performance of this Agreement, but
only in proportion to and to the extent such
liability, loss, expense, attorneys' fees, or claims
for injury or damages are caused by or result from
the negligent or intentional acts or omissions of
Sponsor, its officers, agents, or employees.
12. Assignment
12.1 This Agreement shall not be assigned by either party
without prior written consent of the parties hereto
excepting so far as Amtech may transfer all rights
and duties under this Agreement to its successor in
interest.
13. Agreement Modification
13.1 Any agreement to change the terms of this Agreement
in any way shall be valid only if the change is made
in writing and approved by mutual agreement of
authorized representatives of the parties hereto.
14. Notices
14.1 Any notices given under this Agreement shall be in
writing and delivered by first-class mail, postage
prepaid, or by overnight courier service addressed to
the parties as follows:
14.1.1 For Sponsor:
J. S. Whang, President
Amtech Systems, Inc.
131 South Clark Drive
Tempe, AZ 85281
14.1.2 For University (contractual):
Mark S. Coburn
Contracts and Grants Office
University of California, Santa Cruz
399C Applied Sciences Building
Santa Cruz, California 95064
14.1.3 For University (technical):
Roger W. Anderson
Board of Studies in Chemistry
University of California, Santa Cruz
1156 High Street
Santa Cruz, California 95064
15. Entire Agreement
15.1 This Agreement constitutes the entire understanding
between the parties hereto and there are no
collateral, oral or written agreements or
understandings. This Agreement supersedes any prior
oral or written agreement or understanding between
the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement
in two or more counterparts, each as an original and all together as one
instrument as of the date of last signature below written.
AMTECH SYSTEMS, INC. THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA
By /s/J. S. Whang By /s/ Mark S. Coburn
-------------------------------- --------------------------------
Name J. S. Whang Name Mark S. Coburn
-------------------------------- --------------------------------
Title President Title Contracts and Grants Manager
-------------------------------- --------------------------------
Date 3-2-94 Date 2-28-94
-------------------------------- --------------------------------
<PAGE>
EXHIBIT A
RESEARCH WORK
A Proposal From
The Regents of the University of California
to
Amtech Systems Inc.
131 South Clark
Tempe, Arizona 85281
Photo-CVD Equipment and Process
Principal Investigator:
Roger W. Anderson
Professor of Chemistry
University of California
Santa Cruz, CA 95064
Abstract
This proposal is for the development of a single wafer/flatpanel photo-CVD tool.
Silicon oxide and silicon nitride depositions will be demonstrated and
characterized. The photo-CVD tool will be very useful for thinfilm depositions
for integrated circuit applications, for flat panel displays, and for solar
panel applications. This proposal is for the time period 1 Jan 1994 to 28
February 1995. The proposal is for $360,549 in direct and indirect costs. The
University of California cost sharing is $165,400 in equipment.
Proposal
This proposal from the Regents of the University of California to Amtech Systems
Inc is for a grant to support work in the laboratory of Professor Roger W.
Anderson that will develop a photo-CVD tool. The goal of the research and
development work will be the design and characterization of a photo-CVD tool
that will provide a variety of thinfilm depositions with good thickness
uniformity and convenient process control.
Attached to this proposal are the following items: Work plan for photo-CVD
equipment development; Time line for photo-CVD equipment; Detailed budget
including salaries, supplies, and equipment; Equipment justification; and a burn
rate estimate. The cumulative monthly totals will not be exceeded for a given
month. The Photo-CVD Prospectus and CV for Roger W. Anderson have been forwarded
to Amtech in October. The background and context for this proposal is described
in the Prospectus.
The grant will provide salaries, benefits, and overhead for the R&D team who
will develop the photo-CVD tool. The grant will also purchase required equipment
for the tool development, and the components of the prototype. The grant will
also provide a budget for expendable supplies. Much detail is provided in the
attached budget pages.
Large identified budgetary items are for salaries. I will head up the project,
but two post-doctoral people will be hired to do most of the design and process
development work. The grant will also support one graduate student for one year,
and one graduate student for the summer of 1994.
The overall work product will be AUTOCAD designs for the Photo-CVD tool and the
test results for all designs that were built. The research effort is likely to
result in the optimal design for a single wafer Photo-CVD tool. In particular
the research effort will provide a good solution to the problem of coating
optics in photo-CVD depositions. The photo-CVD prototype will provide simple
evaluation of different purge configurations that can solve this problem. The
purge configuration described in the Amtech patent will be the primary focus of
this work.
The photo-CVD tool will be designed to deposit thinfilms on a single substrate
up to 200 mm in width. The substrates will be loaded by opening one end of the
chamber. The design will allow convenient use of a variety of conventional UV
lamps as well as excimer lasers. The first testing of the photo-CVD tool will
simply use low pressure mercury lamps to photolyze metal carbonyl molecules. The
resulting metallic coatings will be provide a good evaluation of both the purge
technology and the deposition uniformity. The photo-CVD tool will be built
utilizing UV lamps that provide illumination over a long narrow region, and the
lamps may provide cw or pulsed light. The illuminated region on the wafer has
quite small area but the long direction of the illumination is long enough to
extend the width of the substrates. Use of a small illuminated region minimizes
the necessary purge gas flow, and this will greatly help provide deposition
uniformity across the width of the substrate. Uniformity over the entire
substrate will be obtained using several UV lamps for the Amtech purge
configuration or by moving the substrates in the direction perpendicular to the
length of the photolysis lamps. The length of the motion will be made large
enough to allow convenient loading and unloading of the substrates. After the
tool is producing uniform depositions with the low intensity conventional UV
sources, it will be with the use of an excimer laser as the source of UV
photons. The photo-CVD tool will also include some in-situ thinfilm measurements
that will greatly speed up process development. The process parameters (gas
composition and pressure, temperature, and scan rate) will be computer
controlled.
It should be easy to market copies of the UCSC developed photo-CVD tools to R&D
laboratories of the semiconductor industries. Once the industry accepts the
technology, the photo-CVD technology can be repackaged for use with the cluster
tools of various semiconductor equipment companies.
WORK PLAN for Photo-CVD development
(Note: This assumes a starting date of 15 February 1994. For a later starting
date add the delay to these dates.)
Start 15 February 1994
Order AUTOCAD computer system. 20 February 94: start 2 postdoctoral positions on
25 April 94.
Task I: Finish 26 April 1994
Machine drawings for photo-CVD vacuum chamber, drawings for substrate
heated stage, bids and order for vacuum chamber construction,
quotations and orders for vacuum pumps, pressure gauges, vacuum
feedthroughs, heaters, temperature controllers, linear motion and
sensing, vacuum stand, fasteners and seals, venting and electrical for
vacuum pumps. Preliminary value engineering.
Task II: Finish 5 August 1994
Order control computer and interface, power supplies. Assemble and test
vacuum chamber, test translation and heating of substrate stage.
Specify and order gas tray with MFCs and valves. Write preliminary
version of control software. Design the patented Amtech purge
configuration into hardware as the first purge configuration and
specify conventional UV light source. Refine value engineering. Silane
facilitization of laboratory.
Task III: Finish 9 November 1994
Construct bubbler for metal carbonyls, construct chamber exhaust metal
carbonyl destroyer for safety. Assemble simple in-situ thinfilm
thickness monitor. Install RGA. Test Amtech purge configuration.
Determine effect of process and purge gas flow and temperature on
thinfilm uniformity. Test horizontal purge design. Test other purge
configurations if necessary.
Task IV: Finish 18 April 1995
Demonstrate silicon oxide and silicon nitride depositions with low
pressure mercury lamp and excimer laser irradiation. Proceed with
flashlamp and mercury sensitization. Refine AUTOCAD drawings and part
lists. Final Report.
Interim progress reports:
Short reports will be submitted on the first of every month during the
project, and summary reports will be submitted at the finish date for
each task. Trips to Amtech will be made at the conclusion of tasks II,
III, and IV.
AUTOCAD files, parts lists
AUTOCAD files and parts lists including vendors and prices will be
available at the conclusion of tasks III and IV.
<PAGE>
<TABLE>
PHOTO CVD TOOL
<CAPTION>
Task Name Responsible Start Duration End
<S> <C> <C> <C> <C>
Design Prototype 15/Feb/94 105.00 d 20/Jul/94
Specify/delivery of AUTOCAD computer RWA 15/Feb/94 15.00 d 08/Mar/94
Recruit for 2 postdocs 15/Feb/94 45.00 d 22/Apr/94
Order Vacuum Pumps, pressure gauges RWA 15/Feb/94 2.00 d 16/Feb/94
Order ellipsometer 17/Feb/94 2.00 d 18/Feb/94
Drawings for Vacuum Chamber RWA 09/Mar/94 20.00 d 06/Apr/94
Drawings for Substrate heated stage RWA 07/Apr/94 5.00 d 14/Apr/94
Order vacuum feedthroughs RWA 25/Apr/94 1.00 d 25/Apr/94
Order heaters, temperature controllers RWA 26/Apr/94 1.00 d 26/Apr/94
Order linear motion equipment RWA 27/Apr/94 1.00 d 27/Apr/94
Order vacuum stand RWA 15/Mar/94 5.00 d 21/Mar/94
Laboratory facilities RWA 09/Mar/94 90.00 d 20/Jul/94
Order fasteners and seals RWA 07/Apr/94 5.00 d 14/Apr/94
Postdocs arrive 25/Apr/94 1.00 d 25/Apr/94
Task I 26/Apr/94 0.00 d 26/Apr/94
Assemble Prototype 27/Apr/94 70.00 d 05/Aug/94
Take delivery of ordered items 27/Apr/94 1.00 d 27/Apr/94
Specify and build gas tray PD1 27/Apr/94 20.00 d 25/May/94
Specify and build bubbler PD1 26/May/94 13.00 d 14/Jun/94
Design and construct first purge PD2 27/Apr/94 35.00 d 16/Jun/94
Construct exhaust conditioner PD2 15/Jun/94 15.00 d 06/Jul/94
Assemble and test vacuum chamber PD1 15/Jun/94 36.00 d 04/Aug/94
Test translation and heating PD2 07/Jul/94 22.00 d 05/Aug/94
Order control computer Grad 27/Apr/94 5.00 d 03/May/94
Construct computer interface Grad 04/May/94 15.00 d 25/May/94
Write control software Grad 26/May/94 30.00 d 08/Jul/94
Order, delivery of gases/chemicals Grad 11/Jul/94 20.00 d 05/Aug/94
Order Hg lamps, mount, power supply RWA 17/May/94 5.00 d 24/May/94
Task II 05/Aug/94 0.00 d 05/Aug/94
Purge and process tests 21/Jun/94 131.65 d 30/Dec/94
Assemble in-situ thickness monitor PD1 05/Aug/94 15.00 d 26/Aug/94
Install RGA PD2 05/Aug/94 15.00 d 26/Aug/94
Test lamps and optics Grad 05/Aug/94 15.00 d 26/Aug/94
Test first purge with NI(CO)4 PD1 26/Aug/94 5.00 d 02/Sep/94
Determine, process effects PD1 02/Sep/94 20.00 d 03/Oct/94
Analyze NI films Grad 26/Aug/94 53.50 d 15/Nov/94
Build 2nd purge configuration PD2 02/Sep/94 17.50 d 28/Sep/94
Test 2nd configuration PD1 03/Oct/94 25.00 d 09/Nov/94
Design water cleaning module PD1 09/Nov/94 34.50 d 30/Dec/94
Design excimer laser optics Grad2 21/Jun/94 33.00 d 05/Aug/94
Research pulsed light sources Grad2 08/Aug/94 27.00 d 14/Sep/94
Design Hg sensitization process Grad 15/Nov/94 20.00 d 14/Dec/94
Modifications indicated during Task III PD2 28/Sep/94 27.00 d 07/Nov/94
Task III 09/Nov/94 0.00 d 09/Nov/94
Oxide and Nitride Process 09/Nov/94 103.32 d 18/Apr/95
Demonstrate silicon oxide w/Hg lamps PD2 09/Nov/94 34.00 d 30/Dec/94
Analyze lamp oxide samples PD2 30/Dec/94 20.00 d 02/Feb/95
Demonstrate silicon nitride w/Hg lamps PD1 30/Dec/94 25.00 d 10/Mar/95
Demonstrate silicon oxide with laser PD2 02/Feb/95 25.00 d 10/Mar/95
Analyze laser oxide samples PD2 10/Mar/95 20.00 d 07/Apr/95
Demonstrate silicon nitride with laser PD1 10/Mar/95 20.00 d 07/Apr/95
Analyze laser nitride samples PD1 07/Apr/95 4.00 d 18/Apr/95
Design flash lamp source Grad 14/Dec/94 78.82 d 12/Apr/95
Revise drawings RWA 10/Mar/95 22.50 d 11/Apr/95
Final Report RWA 06/Apr/95 5.00 d 18/Apr/95
Task IV 18/Apr/95 0.00 d 18/Apr/95
Printed: 17/Feb/94
Page 1
</TABLE>
EXHIBIT B
DETAILED BUDGET: 03/01/94 - 04/30/95 RESEARCH BUDGET
BUDGET CATEGORY AMTECH UCSC TOTAL
A. SENIOR PERSONNEL
1. Principal Investigator (PI)
Dr. Roger Anderson
100% time 3.00 sum mos 21,576 0 21,576
Total Senior Personnel 21,576 0 21,576
B. OTHER PERSONNEL
1. Postdoctoral Researcher
To Be Selected
100% time 12.00 mos ea yr 26,742 0 26,742
2. Postdoctoral Researcher
To Be Selected
100% time 12.00 mos ea yr 26,742 0 26,742
3. Graduate Student Researcher (GSR)
To Be Selected
1 50% time 9.00 acad mos 10,173 0 10,173
4. Graduate Student Researcher (GSR)
To Be Selected
2 50% time 3.00 sum mos 7,722 0 7,722
5. Undergraduate Student Assistants
274 hours acad mos 1,404 0 1,404
Total Other Personnel 72,783 0 72,783
TOTAL SALARIES AND WAGES 94,359 0 94,359
C. FRINGE BENEFITS Yr 1 Yr 2
(resp ea yr
1. P.I.'s acad mos 19.00% 20.00% 0 0 0
2. P.I.'s sum mos 3.40% 3.40% 734 0 734
3. P.I.'s OASDI 6.20% ea yr 506 0 506
4. Postdoctoral
Researcher 18.50% 19.00% 4,947 0 4,947
5. Specialist 18.50% 19.00% 4,947 0 4,947
6. GSR acad mos 2.24% ea yr 228 0 228
7. GSR sum mos 2.24% ea yr 173 0 173
8. USA acad mos 2.24% ea yr 31 0 31
9. Tuition remission
and fees 2,307 0 2,307
10. Student Health
Insurance (GSHIP) 568 0 568
TOTAL FRINGE BENEFITS 14,441 0 14,441
TOTAL SALARIES, WAGES,
AND FRINGE BENEFITS 108,800 0 108,800
<PAGE>
DETAILED BUDGET: 03/01/94 - 04/30/95
BUDGET CATEGORY AMTECH UCSC TOTAL
D. PERMANENT EQUIPMENT-
PLEASE SEE ATTACHED LISTING 159,705 165,400 325,105
E. TRAVEL
Domestic
1. Travel to Amtech 2,000 0 2,000
2. Travel to MRS meeting 1,200 0 1,200
TOTAL TRAVEL 3,200 0 3,200
F. PARTICIPANT SUPPORT COSTS 0 0 0
G. OTHER DIRECT COSTS
1. Materials and Supplies-
Please see attached listing 20,200 0 20,200
2. Other
a. Machine and glass shop charges 3,000 0 3,000
b. Postage, long-distance telephone,
tax, e-mail duplicating 1,800 0 1,800
Total Other 4,800 0 4,800
TOTAL OTHER DIRECT COSTS 25,000 0 25,000
- --------------------------------------------------------------------------------
H. TOTAL DIRECT COSTS 296,705 165,400 462,105
- --------------------------------------------------------------------------------
I. INDIRECT COSTS
1. Indirect Cost Base 134,125 0 134,125
- --------------------------------------------------------------------------------
2. On-campus research rate
47.6% of MTDC 63,844 0 63,844
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
J. TOTAL DIRECT AND INDIRECT COSTS 360,549 165,400 525,949
- --------------------------------------------------------------------------------
<PAGE>
supplies cvd
PHOTO-CVD SUPPLIES
Supply Budget
1. Gases
Silanes, nitrous oxide, ammonia, $8,000
hydrogen fluoride, fluorine, rare
gases, hydrogen, nitrogen, oxygen, ...
Total Gases $8,000
2. Chemicals
Metal Carbonyls $600
Total Chemicals $600
3. Optics
Supersil Windows $3,000
Total Optics $3,000
4. Misc Supplies
Liquid nitrogen for purge $1,800
Vacuum Pump Oil $500
Electronic Components $1,000
VCR Gaskets, tubing $500
Silicon, glass substrates $2,000
Floppy disks 8 backup tapes $300
Total misc supplies $6,100
5. Outside services
Thinfilm Analysis $2,500
DIRECT SUPPLY TOTAL $20,200
Page 1
<PAGE>
equipment 11
PHOTO-CVD TOOL
EQUIPMENT (no indirect costs) Amtech UCSC
Total w/o tax, ship $145,220 $165,400
Total w/tax, ship $159,705
1. Autocad Computer System
486 DX2/66 Computer $2,400
Multiscan monitor $1,000
AutoCad software $1,000
Printer $1,400
Total CAD system $5,800 $5,800
2. Photo-CVD Tool
A. General Facility $2,000 $500
Stand for Vacuum Chamber $1,000
Electronics/computer racks $500
Vent, electrical for vac pun $1,000
B. Vacuum Chamber $22,000 $2,500
Main vacuum enclosure $15,000
Electrical feedthroughs $1,000 $500
Motion feedthroughs $1,000 $1,000
Gas feedthroughs $1,000 $1,000
Flanges for lamp mounting $2,000
Flange for substrate loading $1,000
Fasteners and seals $1,000
C. Vacuum pumping and general gauging $24,800 $26,200
Mechanical pump 36.7 CFM $5,000
Roots/Mech pump 179 CFM $13,300
2 Foreline traps $700 $700
5 Bellows vacuum valves $2,800 $700
SS flex tube/Fittings $2,000
Butterfly valve $2,500
4 Baratrons $2,000 $2,000
Adaptor pressure control $2,000
Gate Valve $4,200
Cryopump $5,000
Compressor $5,000
Flexline $600
Vacuum Collars - Cryopump $2,000
Ionization Gauge $500
D. Substrate stage $6,000 $6,000 $4,000
Linear bearings, material
Page 1
<PAGE>
Translation mechanism (motor or air)
Position sensing
Heater and temperature control $1,000
Stepper Motor Control $3,000
E. Process Gas control $23,820 $26,700
10 Mass flow controllers $4,800 $10,000
2 MFM $1,620
20 Filters $1,300
32 Bellows sealed valves $1,000 $7,200
VCR fittings $1,200 $1,000
Computer solenoid valves $1,000
Differential Baratron gauge $1,500
Gas heating $1,000
Gas Regulators $2,000 $6,000
Stainless steel tubing $200
Bubbler for liquid reactant $4,000 $1,000
2 Five Channel MFC control $3,700
Pressure readout $2,000
F. Photolysis lamp assembly, light sources $30,000 $71,000
Materials, quartz, contruc $18,000
Purge control $2,000
Lamps/power supplies $10,000 $1,000
Excimer laser $70,000
G. 486 Computer For Process Control $4,800 $4,800 $500
A/D and D/A for MFCs
A/D for pressure sensing
Interface for temperature control
Interface for substrate scanning
5, +15,-15, 24 volt power supplies $500
H. Enhancements $5,000 $31,000
RGA $2,000 $30,000
In-situ thickness monitorir $3,000 $1,000
I. Safety Equipment $11,500 $3,000
Hazardous gas sensing $1,500 $3,000
Burn box/Scrubber $2,000
Facilitize Lab for silane use $8,000
J. Thinfilm Analysis Equipment $9,500
Ellipsometer $9,500
Page 2
<PAGE>
Photo-CVD Equipment Justification
This document provides additional comments about the equipment budget items.
1. Autocad Computer System
This computer system and laser printer will be used to design the
photo-CVD equipment and the microwave excited rare gas/halogen light
source, and to make the machine drawings necessary for their
construction. These files will be sent to Amtech at the conclusion of
Tasks III and IV.
2. Photo-CVD Equipment
A. General Facility
This budget item will provide the stand for the equipment and pay for
the electrical connections and venting of the equipment and vacuum
pumps. The UCSC contribution is for an electronic rack
B. Vacuum Chamber
This budget item will provide the basic vacuum chamber and its flanges
and connections to the outside world. Once the main chamber design is
fixed, a decision will be made whether the chamber should be machined
from solid aluminum blocks, hydroformed, or welded from smaller pieces.
The UCSC contribution is for various feedthroughs.
C. Vacuum pumping and general gauging
The 36.7 vacuum pump (LH D60A) will be used for cryopump backing and
roughing down the main vacuum chamber. This pump is contributed by
UCSC. The 179 CFM roots blower/mechanical pump is necessary for process
exhaust. A large capacity for exhaust is required because of the
substantial gas flow that will be used for optical window purge. A
roots blower will provide the necessary volumetric flow at pressures up
to 10 torr. It may be possible to purchase this item on the surplus
equipment market. The foreline traps are required to reduce
backstreaming of pump oil into the chamber. The bellows valves are
required for cryopump foreline and process exhaust. The stainless steel
flexible tubing and the fittings are required to connect the mechanical
pumps. The butterfly valve will be used for process pressure control.
Input to the control unit (Adaptorr) will be made from one or more of
the capacitance manometers (Baratrons). The gate valve, cryopump,
compressor, and flexline are contributed by UCSC and are required to
provide a low base pressure in the chamber. This is necessary for
substrate surface preparation and for the satisfactory deposition of
metallic coatings. The vacuum collars are required to connect the gate
valve and the cryopump to the vacuum system. The ionization gauge will
monitor the base pressure.
D. Substrate stage
The substrate stage must be heated and precisely moveable. Linear
bearings, position sensing, heaters and controllers are necessary. The
UCSC contribution is for Anaheim stepper motor controllers and for
temperature controllers.
E. Process Gas control
This is a very important item as it will provide the proper process gas
mixtures and the proper amount of purge gas that is necessary. Seven of
the ten mass flow controllers will be contributed by UCSC. The mass
flow meters are necessary to provide on line calibration of the MFCs.
UCSC can contribute many of the bellows sealed valves and regulators
for gas cylinders. The differential Baratron gauge will be used for
process and purge gas pressure control, it exists already at UCSC. The
main expense for the bubbler is a refrigerated bath and machine shop
time. UCSC can contribute valves and other fittings. The MFC control
and pressure readout will provide manual as well as computer control of
process conditions.
F. Photolysis lamp assembly, light sources
This is probably the most important budgetary item. This budget
subheading will fund the different implementations of purge and light
sources. The construction budget should allow testing of as many as
three purge designs. The purge control budget will provide special
machining of parts to provide optimum separation of the purged and
process regions. The lamp and power supply budget will provide low
pressure mercury lamps of both standard and special 185 nm optimized
types. The power supply budget will also provide the possibility of DC
operation of the mercury lamps that has been shown to provide better
efficiency in the UV. Flash lamps and power supplies can also be
purchased. The UCSC contribution includes power supplies and use of an
excimer laser.
G. 486 Computer for Process Control
This computer will have analog/digital and digital/analog interfaces
for process control. It will also interface with the MFC control units
and the Adaptorr pressure controller. The process control software will
be written in C.
H. Enhancements
The RGA is necessary to check process gas composition, to check purge
efficiency, and to look for leaks. UCSC has a LH IQ200 RGA with turbo
mechanical pumps. However it needs some repair work which would be the
Amtech contribution. The In-situ thickness monitor will probe
deposition thickness by measuring reflection and/or transmission
through thin films. A laser and a photodetector are required. UCSC can
contribute optical mounts and mirrors.
I. Safety Equipment
This item will provide hazardous gas sensing, and post-process gas
treatment. Venting must be provided in the UCSC laboratories to use
silane.
J. Thinfilm Analysis Equipment
An ellipsometer is required to provide the thickness and index of
refraction of deposited silicon dioxide and nitride thinfilms. This
equipment does not presently exist at UCSC and must be acquired. This
price if for a used automatic ellipsometer.
The UCSC campus has excellent FTIR facilities however that can be used
for routine analysis of silicon oxide and nitride thin films.
<PAGE>
<TABLE>
Burn Rate for Photo-CVD Equipment and Process
<CAPTION>
MONTH SALARY EQUIPMENT SUPPLIES TRAVEL OTHER MONTH TOT. CUMULATIVE
<S> <C> <C> <C> <C> <C> <C> <C>
Feb-94 $ 0 $ 10,000 $ 764 $ 0 $ 299 $ 11,063 $ 11,063
Mar-94 $ 1,354 $ 34,660 $ 764 $ 0 $ 261 $ 37,039 $ 48,103
Apr-94 $ 1,354 $ 50,013 $ 764 $ 517 $ 522 $ 53,170 $101,273
May-94 $ 11,175 $ 13,970 $ 2,293 $ 0 $ 522 $ 27,960 $129,234
Jun-94 $ 9,821 $ 18,172 $ 2,293 $ 517 $ 522 $ 31,325 $160,559
Jul-94 $ 22,905 $ 19,690 $ 2,293 $ 0 $ 522 $ 45,411 $205,969
Aug-94 $ 22,905 $ 3,850 $ 2,293 $ 517 $ 522 $ 30,088 $236,057
Sep-94 $ 20,963 $ 3,300 $ 2,293 $ 0 $ 522 $ 27,079 $263,136
Oct-94 $ 9,821 $ 3,300 $ 2,293 $ 517 $ 522 $ 16,453 $279,589
Nov-94 $ 9,821 $ 2,750 $ 2,293 $ 0 $ 522 $ 15,386 $294,975
Dec-94 $ 9,821 $ 0 $ 2,293 $ 2,141 $ 522 $ 14,777 $309,752
Jan-95 $ 9,821 $ 0 $ 2,293 $ 0 $ 522 $ 12,636 $322,388
Feb-95 $ 9,821 $ 0 $ 2,293 $ 0 $ 522 $ 12,636 $335,024
Mar-95 $ 9,821 $ 0 $ 2,293 $ 0 $ 522 $ 12,636 $347,660
Apr-95 $ 9,821 $ 0 $ 2,293 $ 514 $ 261 $ 12,889 $360,549
Subtotals $159,221 $159,705 $ 29,815 $ 4,723 $ 7,085 $360,549
Total for Phase I $360,549
</TABLE>
<PAGE>
AMTECH SYSTEMS, INC.
March 1, 1994
Mr. Mark S. Coburn
Contracts and Grants Office
University of California, Santa Cruz
399C Applied Sciences Building
Santa Cruz, California 95064
Dear Mr. Coburn:
I have signed the Research Agreement previously executed by you. However, in
reviewing it one final time I wanted to be sure of your understanding in
Paragraph 4.3 that the phrase "during the period of access by Sponsor" commences
upon termination of the fourteen month term of this agreement. In Paragraph 8.2,
the phrase "that sponsor pays full cost", means that sponsor's full cost of the
research project under this agreement is $360,549.00. And in Paragraph 14.1.1,
Amtech's address is 131 South Clark Drive. Please execute this letter in the
space provided confirming your understanding.
I look forward to a mutually beneficial and enjoyable relationship with the
University of California.
Sincerely,
/s/J.S. Whang
J.S. Whang
President
JSW:cb
As discussed with you on March 2, 1994 the points above, except for the fourth
sentence referencing "Research Inventions," are confirmed as our understanding.
APPROVED AND EXECUTED BY:
/s/Mark S. Coburn 3-2-94
- ---------------------------------------------
Mark S. Coburn
<PAGE>
AMTECH SYSTEMS, INC.
March 30, 1994
Mr. Mark S. Coburn
University of California, Santa Cruz
Contracts and Grants Office
399C Applied Sciences Building
Santa Cruz, California 95064
Dear Mr. Coburn:
The purpose of this letter is to confirm and to reduce to writing the agreement
of Amtech Systems, Inc. ("Sponsor") and The Regents Of The University of
California ("University") to modify the Research Agreement between them dated
March 2, 1994, as provided below.
Section 4.1 shall be modified as follows:
The total cost to the Sponsor shall not exceed $355,405 payment of
which shall be made in full prior to March 31, 1994.
Section 9.1 shall be amended to read as follows:
Sponsor may terminate this Agreement upon thirty (30) days prior
written notice to the University.
Nothing in this letter in any way affects any of the other provisions of the
Research Agreement or any of the obligations of either of the parties
thereunder.
If the foregoing accurately reflects your understanding and you agree as set
forth above, please have a copy of this letter signed by a duly authorized
person and return it to us, whereupon it will become a binding amendment to the
Research Agreement.
Very truly yours,
/s/J.S. Whang
J.S. Whang, President
JSW:cb
ACCEPTED AND AGREED TO:
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By: /s/ Mark Coburn
--------------------------------
Mark S. Coburn
Their: Contracts and Grants Manager
--------------------------------
<PAGE>
FAX
Contracts and Grants Office
399C Applied Sciences Building
University of California, Santa Cruz
Santa Cruz, CA 95064
tel; (408) 459-4114
fax; (408) 459-4989
email: [email protected]
To: J.S. Whang
---------------------
Organization: Amtech Systems, Inc.
---------------------
FAX No: (602) 968-3763
---------------------
Date: March 30, 1994
---------------------
From: Mark Coburn
---------------------
Number of pages (including this cover page): 2
Message: J.S., please send back a copy
with your signature for our
records. Thanks.
Please notify us if this document was not properly received.
<PAGE>
AMTECH SYSTEMS, INC.
March 7 1995
Mr. Mark S. Coburn
University of California, Santa Cruz
Contracts and Grants Office
399C Applied Sciences Building
Santa Cruz, California 95064
Dear Mr. Coburn:
The purpose of this letter is to confirm and to reduce to writing the agreement
of Amtech Systems, Inc. ("Sponsor") and The Regents Of The University of
California ("University") to modify the Research Agreement ("Agreement") between
them dated March 2, 1994, as provided in Section 1.1 and below.
WHEREAS, the Work Plan included as a part of Exhibit A to the Agreement reflects
a planned start date of February 15, 1994 and the actual start date for the
Research was April 15, 1994; and
WHEREAS, the same Work Plan reflects that two (2) post doctoral positions were
to be filled on April 25,1994 and the actual dates that the post doctorates
arrived at the University were June 20 and June 27, 1994.
NOW, THEREFORE, the first sentence of Section 2.1 is hereby modified to read,
"The period of performance of this Agreement is April 15, 1994 through June 30,
1995."
Nothing in this letter in any way modifies any of the other provisions of the
Research Agreement.
If the foregoing accurately reflects your understanding and you agree as set
forth above, please have a copy of this letter signed by a duly authorized
person and return it to us, whereupon it will become a binding amendment to the
Research Agreement.
Very truly yours,
/s/J.S. Whang
J.S. Whang, President
JSW:rh
ACCEPTED AND AGREED TO:
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By: /s/Mark Coburn
--------------------------------
Their: Contracts and Grants Manager
-----------------------------
<PAGE>
AMTECH SYSTEMS, INC.
June 26, 1995
Mr. Mark S. Coburn
University of California, Santa Cruz
Contracts and Grants Office
399C Applied Sciences Building
Santa Cruz, California 95064
Dear Mr. Coburn:
The purpose of this letter is to confirm and to reduce to writing the agreement
of Amtech Systems, Inc. ("Sponsor") and The Regents Of The University of
California ("University") to modify the Research Agreement ("Agreement") between
them dated March 2, 1994, as provided in Section 1.1 and below.
Because of the resignation of Ji Ding and the fact that it is not feasible to
hire another talented postdoc for this project for the remaining months of Ji's
position, we hereby agree to an extension of our agreement through October 15,
1995.
NOW, THEREFORE, the first sentence of Section 2.1 is hereby modified to read,
"The period of performance of this Agreement is March 1, 1994 through October
15, 1995."
It is understood that this extension involves no additional cost to Amtech
Systems, Inc., the Sponsor.
Nothing in this letter in any way modifies any of the other provisions of the
Research Agreement.
If the foregoing accurately reflects your understanding and you agree as set
forth above, please have a copy of this letter signed by a duly authorized
person and return it to us, whereupon it will become a binding amendment to the
Research Agreement.
Very truly yours,
/s/J.S. Whang
J.S. Whang, President
JSW:rh
ACCEPTED AND AGREED TO:
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By: /s/Karen Ann Reinero
-------------------------------
Their: Contracts and Grants Manager
----------------------------
<PAGE>
AMTECH SYSTEMS, INC.
October 16, 1995
Mr. Mark S. Coburn
University of California, Santa Cruz
Contracts and Grants Office
399C Applied Sciences Building
Santa Cruz, California 95064
Dear Mr. Coburn:
The purpose of this letter is to confirm and to reduce to writing the agreement
of Amtech Systems, Inc. ("Sponsor") and The Regents Of The University of
California ("University") to modify the Research Agreement ("Agreement") between
them dated March 2, 1994, as provided in Section 1.1 and below.
Because of delays in the performance of this project, we hereby agree to an
extension of our agreement through November 15, 1995.
NOW, THEREFORE, the first sentence of Section 2.1 is hereby modified to read,
"The period of performance of this Agreement is April 15, 1994 through November
15, 1995."
It is understood that this extension involves no additional cost to Amtech
Systems, Inc., the Sponsor.
Nothing in this letter in any way modifies any of the other provisions of the
Research Agreement.
If the foregoing accurately reflects your understanding and you agree as set
forth above, please have a copy of this letter signed by a duly authorized
person and return it to us, whereupon it will become a binding amendment to the
Research Agreement.
Very truly yours,
/s/J.S. Whang
J.S Whang, President
JSW:rh
ACCEPTED AND AGREED TO:
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By:
-----------------------------------
Their:
---------------------------------
<PAGE>
AMTECH SYSTEMS, INC.
November 29, 1995
Mr. Mark S. Coburn
University of California, Santa Cruz
Contracts and Grants Office
399C Applied Sciences Building
Santa Cruz, California 95064
Dear Mr. Coburn:
The purpose of this letter is to confirm and to reduce to writing the agreement
of Amtech Systems, Inc. ("Sponsor") and The Regents Of The University of
California ("University") to modify the Research Agreement ("Agreement") between
them dated March 2, 1994, as provided in Section 1.1 and below.
Because of delays in the performance of this project, and to allow time to
complete the NIQ work to demonstrate the potential of these lamps for Photo-CVD
processes by January 31, 1996, and to possibly facilitate augmentation of the
budget beyond the NIQ phase, we hereby agreed to an extension of our agreement
from November 15, 1995 to October 31, 1996.
Section 4.1 shall be modified as follows:
The total cost to the Sponsor shall not exceed $441,620, an increase of
$86,215 over the initial contract amount, to demonstrate the effectiveness of
the NIQ lamps. It is expressly understood that this increase includes salaries
of support staff through February 28, 1996 and 1.5 months of salary for Roger
Anderson, Phd. for the summer months of calendar year 1996.
NOW, THEREFORE, the first sentence of Section 2.1 is hereby modified to read,
"The period of performance of this Agreement is April 15, 1994 through October
31, 1996."
It is understood that this extension involves no additional cost to Amtech
Systems, Inc., the Sponsor beyond the increase stated above.
Nothing in this letter in any way modifies any of the other provisions of the
Research Agreement.
Continued on next page...
<PAGE>
Mr. Mark S. Coburn
University of California, Santa Cruz
November 29, 1995
Page 2
If the foregoing accurately reflects your understanding and you agree as set
forth above, please have a copy of this letter signed by a duly authorized
person and return it to us, whereupon it will become a binding amendment to the
Research Agreement.
Very truly yours,
/s/J.S. Whang
J.S. Whang, President
JSW:rh
ACCEPTED AND AGREED TO:
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By:
--------------------------------------
Their:
--------------------------------------
<PAGE>
AMTECH SYSTEMS, INC.
December 4, 1995
Mr. Mark S. Coburn
University of California, Santa Cruz
Contracts and Grants Office
399C Applied Sciences Building
Santa Cruz, California 95064
Re: Payment Procedures
Dear Mr. Coburn:
The purpose of this letter is to confirm our desire that the $86,215 increase in
funding, pursuant to the November 29, 1995 Amendment to the Research Agreement,
be billed by the University on a pay as you go basis (i.e. progress billings
only for work performed and approved expenses incurred). The billing procedure
is subject to change by the mutual agreement between the Sponsor and the
University. It is expressly understood that the sum of any such billings will
not exceed the agreed upon increase of $86,215.
If the foregoing accurately reflects your understanding and you agree as set
forth above, please have a copy of this letter signed by a duly authorized
person and return it to us, whereupon it will become a binding amendment to the
Research Agreement.
Very truly yours,
/s/Robert T. Hass
Robert T. Hass, CPA
Vice President-Finance
and Secretary
RTH:rh
ACCEPTED AND AGREED TO:
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By:
--------------------------------------
Their:
--------------------------------------
AMTECH SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------
EXHIBIT 11
----------
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
-----------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
-----------------------------------------------------
1995 1994 1993
---------- ---------- ----------
Net income $ 226,568 $ 94,004 $ 508,670
========== ========== ==========
PRIMARY
- --------------------------
Weighted average number of
common shares outstanding
during the year 1,901,426 945,351 987,538
Add - common equivalent shares
determined using the "treasury stock"
method representing shares issuable
upon vesting of stock bonuses and
exercise of employee and director
stock options (1) -- 19,191 3,724
---------- ---------- ----------
Weighted average number of shares
used in the calculation of primary
income per common share 1,901,426 964,542 991,262
========== ========== ==========
Primary income per
common share $ .12 $ .10 $ .51
========== ========== ==========
FULLY DILUTED
- ---------------------------------
Weighted average number of shares
used in calculating primary
income per common share 1,901,426 964,542 991,262
Add incremental shares representing
shares issuable upon exercise of
stock options and warrants based
upon the year-end market price (1) -- 258 21,432
---------- ---------- ----------
Weighted average number of shares
used in the calculation of fully
diluted income per common share 1,901,426 964,800 1,012,694
========== ========== ==========
Fully diluted income
per common share $ .12 $ .10 $ .50
========== ========== ==========
EXHIBIT 11
(1) Determined using the modified treasury stock method.
SUBSIDIARIES OF THE REGISTRANT
Tempress Systems, Inc. -- Incorporated Sunder the laws of the State of Texas.
Echelon Service Company -- Incorporated under the laws of the State of Maryland.
Echelon Security Services Company -- Incorporated under the laws of the State of
Maryland (a subsidiary of Echelon Service Company).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE BALANCE SHEETS AS
OF SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994, AND
THE STATEMENTS OF OPERATION AND THE STATEMENTS OF
CASH FLOW FOR THE THREE YEARS ENDED SEPTEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1995.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 833,820
<SECURITIES> 3,671,569
<RECEIVABLES> 2,366,743
<ALLOWANCES> 80,000
<INVENTORY> 524,071
<CURRENT-ASSETS> 7,526,595
<PP&E> 1,148,982
<DEPRECIATION> 499,184
<TOTAL-ASSETS> 8,365,519
<CURRENT-LIABILITIES> 1,363,291
<BONDS> 0
<COMMON> 21,529
0
0
<OTHER-SE> 6,980,699
<TOTAL-LIABILITY-AND-EQUITY> 8,365,519
<SALES> 6,864,068
<TOTAL-REVENUES> 7,085,539
<CGS> 4,558,675
<TOTAL-COSTS> 4,558,675
<OTHER-EXPENSES> 2,230,107
<LOSS-PROVISION> 35,704
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 261,053
<INCOME-TAX> 90,000
<INCOME-CONTINUING> 171,053
<DISCONTINUED> 55,515
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 226,568
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
